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Monthly Market Analytics & Technical Analysis DECEMBER 2014 Edition DECEMBER DATA FILE MATA- DECEMBER 2014 12/15/2014
Monthly Market Analytics & Technical Analysis DECEMBER 2014 Edition DECEMBER DATA FILE MATA- DECEMBER 2014 12/15/2014

Monthly Market Analytics & Technical Analysis

DECEMBER 2014 Edition

DECEMBER DATA FILE

MATA- DECEMBER 2014

12/15/2014

1

DECEMBER 2014 Edition

Restricted & Confidential

Copyright 2014 © Gordon T. Long

All Rights Reserved

general@GordonTLong.com

   
Monthly Market Analytics & Technical Analysis DECEMBER 2014 HIGHLIGHTS - W HAT Y OU N EED

Monthly Market Analytics & Technical Analysis

DECEMBER 2014

HIGHLIGHTS - WHAT YOU NEED TO KNOW

...................................................................................................................................

9

 

SUMMARY ANALYSIS

 

10

Valuation Summary

19

 

22

24

25

 

Defining Chart #3 - The Big “M” and Super Cycle “b”

 

27

Defining Chart #4 Intermediate Term Topping Process

28

OUR APPROACH - MACRO ANALYTICS

 

30

 
31
 

31

 

32

 

DRIVER$: HARD ASSETS - Commodities & Dr Cooper

 

35

DRIVER$: HARD ASSETS - Silver

 

36

DRIVER$:

HARD

ASSETS

-

36

DRIVER$: CARRY TRADE - The € : ¥ Cross Focus

 

40

DRIVER$: CURRENCIES

 

52

USD ................................................................................................................................................................................................................

52

EURO

53

DRIVER$: BONDS - Yield, Spread & Credit

 

55

DRIVER$:

GLOBAL

 

57

CHARTS OF NOTE

 

58

NEW-DRIVER$ A Rout in Emerging Market Currencies Going On with a US Short Dollar Squeeze

58

NEW-DRIVER$ US stock market indices have become massively decoupled from the bond

 

58

NEW-DRIVER$ US stock market indices have become massively decoupled from the Credit

59

NEW-DRIVER$ Traded Weighted Euro versus

59

NEW-DRIVER$ 10Y UST versus 10Y

60

NEW-DRIVER$ 1-2% YTD Drop in Global 10Y Bonds

60

NEW-DRIVER$ – Our Real “D r “ Taking Hold

62

NEW-DRIVER$ – Commodities in ‘Technical’ Danger Zone as Global Growth Slows

63

NEW-DRIVER$ 10Y UST Disconnected from Fed Expectations Deutsche Bank

64

NEW-DRIVER$ 10Y UST Disconnected from Fed Expectations Deutsche Bank

65

NEW-DRIVER$ World Inflation Falls To 59-Month

66

DRIVER$ Copper at Critical Support

67

DRIVER$ Gold Tracked US Debt Until Recently Will Likely Re-Establish Long Term Pattern

69

DRIVER$ Yen Breaks 25 Year Trend Support

 

69

DRIVER$ Euro Falls to Lowest Level since August 2012

70

RESEARCH OF NOTE ......................................................................................................................................................................................

71

NEW-DRIVER$ - The Drop in the Oil Price Should Not be Viewed in a Vacuum (13 Charts)

 

71

NEW-DRIVER$ - Dr. Copper Near Major Technical Breakdown

76

 

78

 

DRIVER$ - USD the Dominate Factor Over the Past Year

81

DRIVER$ - USD Index Breaks 30 Year Trend Resistance ...........................................................................................................................

82

DRIVER$ - Strong Dollar Contributing to Weak Commodities

83

DRIVER$ - Shortage of Collateral forces Reduced Liquidity

84

 

87

 

DRIVER$ - Macro Forecasts Hinge on a Deteriorating US

 

91

RESEARCH OF NOTE ......................................................................................................................................................................................

93

NEW-SENTIMENT U Michigan Consumer Confidence Goes Euphoric - Highest Since Dec 2006

93

NEW-SENTIMENT - Global Business Confidence Collapses To Post-Lehman Lows

 

94

SENTIMENT - Extreme Levels of the Bull/Bear Ratio

97

SENTIMENT - Fear & Greed Index

 

98

 

99

100

 

SENTIMENT – Sentiment is “Off the Charts” Bullish

 

103

RISK: Risk-On versus Risk-Off

 

109

CHARTS OF NOTE

 

110

NEW-CHARTS 8 th Hindenburg Omen Within 9 Days First Occurrence in 25 Years

 

110

NEW-CHARTS Unprecedented Surge in Energy CDS

111

NEW-CHARTS Margin Financing Underpins China Stock Rally

111

NEW-CHARTS Chinese stocks +33% in 6

112

NEW-CHARTS Leverage Loan Ratios Approaching Pre-Lehman

112

NEW-CHARTS 13 Chart Set of MSCI World Median P/E -- At 93-Month High

113

NEW-CHARTS 25 Set Chart Update of Global Stock Market Internals

119

CHARTS Margin Debt and Net Investor Credit at All Time

129

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CHARTS – Ultra Low Mutual Fund Cash Levels doesn’t Bode Well For a ‘Redemptions’ Run .................................................................

CHARTS – Ultra Low Mutual Fund Cash Levels doesn’t Bode Well For a ‘Redemptions’ Run

.................................................................

CHARTS – Fed’s Financial Stress Indicator – an Era of Extreme Complacency

.......................................................................................

CHARTS "NAAIM Fund Managers 75% Net Long on Average

...............................................................................................................

CHARTS Rydex Bull-Bear Ratio Reaches all Time High Above 2000 Peak

........................................................................................

CHARTS Historic 2 Week Change in Newsletter Bulls

............................................................................................................................

CHARTS – There are only 15% “Bears”

......................................................................................................................................................

CHARTS The Problem with the Global Recovery Thesis in Two Charts

.................................................................................................

CHARTS Historically Excessive Risk Taking

...........................................................................................................................................

CHARTS "Consistency Breeds Complacency"

........................................................................................................................................

RESEARCH OF NOTE ....................................................................................................................................................................................

NEW-RISK Sustained Credit Market Divergences Similar to 2007 and Pre-2008 Crisis

........................................................................

NEW-RISK Major Trend Line Support Being Broken in WTIC, Commodities and Copper

.....................................................................

NEW-RISK 5 Reasons Markets Are Heading for a

Crash........................................................................................................................

NEW-RISK NYSE Flashing Red

...............................................................................................................................................................

NEW-RISK Breadth Overvalued, Overbought, Overbullish

..................................................................................................................

130

131

131

132

133

133

134

135

135

137

137

138

140

142

143

TECHNO-FUNDAMENTALS

.................................................................................................................................................................................

CHARTS OF NOTE

.........................................................................................................................................................................................

NEW-CHARTS World GDP Growth Does Not Support Stock

Expectations............................................................................................

NEW-CHARTS S&P 500 versus Q4 US GDP Expectations

....................................................................................................................

NEW-CHARTS WTI at 2009 Levels and Marginally Above 2008 Crisis

Levels.......................................................................................

NEW-CHARTS Credit Has Been Signaling a Clear Problem Ahead Since Early

2013...........................................................................

NEW-CHARTS – Current Economic Cycle is Getting “Old in the Tooth”

....................................................................................................

NEW-CHARTS Signs That Something Is Broken Somewhere Bonds, Oil versus Stocks

...................................................................

NEW-CHARTS Economic Activity and CRB YoY Rapidly Diverging

.......................................................................................................

NEW-CHARTS Federal Reserve Assets versus Stock Prices

.................................................................................................................

NEW-CHARTS 10Y UST Disconnected from Fed Expectations Deutsche Bank

.................................................................................

NEW-CHARTS US versus World Markets

...............................................................................................................................................

CHARTS Eerie 2007 SPX Comparisons

..................................................................................................................................................

CHARTS Revisiting the Macro Bias

.........................................................................................................................................................

CHARTS - Looming Near Term Overhead Resistance

............................................................................................................................

CHARTS NYAD Divergence

.....................................................................................................................................................................

CHARTS Dollars Effect on US Stocks

......................................................................................................................................................

CHARTS "Volumeless" and "Overbought"

...............................................................................................................................................

CHARTS Short Squeeze

..........................................................................................................................................................................

CHARTS McClelland Oscillator Warning

..................................................................................................................................................

RESEARCH OF NOTE ....................................................................................................................................................................................

NEW-PATTERNS Broader Markets Steadily Breaking Down

..................................................................................................................

NEW-PATTERNS Longest Streak In Stock Market History

.....................................................................................................................

NEW-PATTERNS Unprecedented Move by Historic Measures

..............................................................................................................

NEW-PATTERNS Near term Consolidative Correction

...........................................................................................................................

NEW-PATTERNS Signals in the CDX HY

................................................................................................................................................

PATTERNS - Megaphone Fractal at a Smaller Degree

..............................................................................................................................

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164

165

167

OUTLOOK - ANALYTICAL ANALYSIS

..........................................................................................................................................

169

STUDY: BUYBACKS Surges Back

In Q3 ...........................................................................................................................................................

CHARTS OF NOTE

.........................................................................................................................................................................................

NEW-BUYBACKS Cash to Stockholders Exceeds 90% of

Profits...........................................................................................................

NEW-BUYBACKS Stock Repurchases Surge 30% in Q3

NEW-BUYBACKS Stock Repurchases 2

nd

Highest on Record at $145B

.......................................................................................................................

................................................................................................

NEW-BUYBACKS 2914 YTD Stock Repurchases By Corporation 20 Corporations Over $4B

...........................................................

NEW-BUYBACKS Operating EPS With / Without Buybacks

...................................................................................................................

NEW-BUYBACKS – Sales & Revenue Doesn’t Support Reported EPS Due to Buyback Distortion

.........................................................

NEW-BUYBACKS S&P 500 Buyback Index versus S&P 500

.................................................................................................................

BUYBACKS The New S&P 500 Buyback Index TR

.................................................................................................................................

BUYBACKS The New S&P 500 Buyback Index Since Start of QE

.........................................................................................................

BUYBACKS IBM Total Debt to Equity (to Fund Buybacks)

.....................................................................................................................

BUYBACKS IBM Debt Issuance v Buybacks

...........................................................................................................................................

BUYBACKS Global FDI into Finance versus Productive Assets

.............................................................................................................

BUYBACKS Total Corporate Debt 35% Higher than 2008 Peak Used for Buybacks

..........................................................................

BUYBACKS Buyback Bonanza

................................................................................................................................................................

BUYBACKS Buybacks Have Made a 1% Earnings Growth Distortion to Median S&P 500 Company

...................................................

BUYBACKS Top 10 Buyback Companies

................................................................................................................................................

BUYBACKS Intel Buybacks

......................................................................................................................................................................

BUYBACKS Shares Outstanding Back at 2000 Level

.............................................................................................................................

BUYBACKS Largest Volumes of Buybacks by US Listed Corporation in Last Year

...............................................................................

BUYBACKS Corporations Are No Longer Investing But Rather Financial Engineering Stock Prices

.....................................................

BUYBACKS Q2 Drop-Off Closer to Normal

..........................................................................................................................................

BUYBACKS Borrowing to Buy back Shares

.............................................................................................................................................

BUYBACKS Cyclical Nature of Buybacks Evident

...................................................................................................................................

BUYBACKS Major Q2 Repurchases

........................................................................................................................................................

BUYBACKS Major Q1 Repurchases

........................................................................................................................................................

BUYBACKS Quarterly Repurchase & Buyback Yield

...............................................................................................................................

BUYBACKS US Corporate Cash versus Buybacks

..................................................................................................................................

BUYBACKS Net Debt/EBITDA of American Non-Financial Corporations

...............................................................................................

RESEARCH OF NOTE

....................................................................................................................................................................................

NEW-BUYBACKS - Q3 Buybacks Surging, These Are The Top 20 Repurchasers Of Their Own Stock

..................................................

169

169

169

169

170

170

171

171

172

172

173

173

174

175

175

176

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182

183

183

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NEW- BUYBACKS - Accounting Magic 186 BUYBACKS - The largest source of overall US equity demand
 

NEW-BUYBACKS - Accounting Magic

 

186

BUYBACKS - The largest source of overall US equity demand in recent

188

BUYBACKS - Has Boosted Median Earnings Growth by 100 bps for S&P 500

191

BUYBACKS - Companies Spend Almost All Profits On Buybacks

197

BUYBACKS - Buyback At Biggest Pace Since 2007

 

201

BUYBACKS - Buyback Party Slowing

203

BUYBACKS - Buyback Party Slowing

208

THE $2T TAX RUSE It’s a Free Ride for US Corporations

213

UNPRECEDENTED BUYBACKS LEVELS

213

A FREE TAX

215

GENERIC TAX EXAMPLE ...........................................................................................................................................................................

215

NEWS-STUDY: OIL PRICE COLLAPSE

 

220

CHARTS OF NOTE

220

NEW-ENERGY Dubai Stocks Dive by Most Since 2009 Crisis as Oil Powered Gulf Bourses Crash

220

NEW-ENERGY Most US shale play costs are below $80 a barrel – ‘Challenged’ when approaching $60

220

NEW-ENERGY Breakeven for All Global Oil Projects

 

222

NEW-ENERGY Putin Cancels South Stream through Bulgaria To Go Through Turkey

223

NEW-ENERGY Putin Cancels South Stream through Bulgaria To Go Through Turkey

224

NEW-ENERGY Petro$$ Capital Exports Go Negative for First Time in 18 Years

225

NEW-ENERGY Falling Inflation Adjusted Gasoline Prices

226

NEW-ENERGY US v Saudi Oil Production now Equal at near 12B bl/Day

227

NEW-ENERGY US Shale Oil Breakeven Prices

228

NEW-ENERGY OPEC Announcement Crushes Ruble & WTI Crude

228

NEW-ENERGY USDRUB Rise Means Russian Loans in US$ In Big Trouble- Investment Collapse

229

NEW-ENERGY EM Oil Producers Being Crushed

 

229

NEW-ENERGY Market Cap Impacts of OPEC Decision

230

NEW-ENERGY Oil Supply / Demand and

231

NEWS-STUDY: GOLD WARS ...............................................................................................................................................................................

232

CHARTS OF NOTE

232

NEW-GOLD Chinese Gold Imports from Switzerland and Hong Kong

 

232

NEW-GOLD Shanghai Gold Exchange Growth

232

NEW-GOLD Total Chinese Gold Reserves

233

NEW-GOLD Chinese Gold

233

NEW-GOLD Russian Central Bank Gold Reserve Growth

234

NEW-GOLD Official Gold Reserves of Largest Industrial Nations

234

NEW-GOLD Pirce of Gold (US$) versus Total US Debt (on Balance Sheet)

235

NEW-GOLD Gold Competing with Currency versus Physical

235

NEW-GOLD Swiss National Bank Assets: Gold versus Money Printing

236

NEW-GOLD Swiss Franc Has Lost 90% of its Purchasing Power Since 1914

236

NEW-GOLD SwissNB Monetary Base in Billions of Francs

237

NEW-GOLD Venezuela Gold Reserves Falling

237

NEW-GOLD CB Balance Sheet Growth versus Gold Supply

238

NEW-GOLD Total GLD Net Asset Value (Tonnes)

238

NEW-GOLD Gold/Silver Ratio Back to Lehman (9/15/08) Highs

239

NEW-GOLD East-v-West Gold Demand

239

NEW-GOLD East-v-West Gold Reserve Growth

240

NEW-GOLD

Gold Discoveries versus Discovery Cost .............................................................................................................................

240

NEW-GOLD All-In Producing Cost Estimated at $1350/Oz in H1 2014

 

241

NEW-GOLD Gold is Historically Strong During Periods of Systemic Risk

241

NEWS-STUDY: SHRINKING LIQUIDITY

242

CHARTS OF NOTE

242

NEW-LIQUIDITY Central Bank Liquidity Injections 2009-2014

 

242

NEW-LIQUIDITY Austrian Money Supply % Change YoY Outstandings-1

243

NEW-LIQUIDITY Austrian Money Supply % Change YoY Outstandings-2-Defining Trend Support

243

NEW-LIQUIDITY Austrian Money Supply % Change YoY Outstandings-3-Consolidation Triangle

244

NEW-LIQUIDITY Austrian Money Supply Historical Patterns versus SPX-1-Consolidation Triangle

244

NEW-LIQUIDITY Austrian Money Supply Historical Patterns versus SPX-2-Triggers

 

245

NEW-LIQUIDITY Austrian Money Supply Potential Relationship Triggers

245

RESEARCH OF NOTE ....................................................................................................................................................................................

246

NEW-LIQUIDITY 6 Years of Central Bank Liquidity Injections

 

246

NEW-LIQUIDITY U.S. Money Supply Decelerates in October, the Risk of an Economic Bust Just Went Up

247

STUDY: EARNINGS Q3 Actual Q4 Forecasts

 

252

CHARTS OF NOTE

252

NEW-EARNINGS Economic v Earnings Growth (Projections v Reality)

 

252

NEW-EARNINGS The Never Foreseen Danger – “Earnings Reversion” Because Markets Are Cyclical

252

NEW-EARNINGS – Forward Earnings Estimates Becoming “Unusually” Over Optimistic

 

253

NEW-EARNINGS Earnings Deviation to the Long Term Growth Trend

253

EARNINGS Q4 Earnings Look like a Major Disappointment

254

RSEARCH OF NOTE

255

NEW-EARNINGS Q3 2014 Earnings Breakdown

 

255

EARNINGS Revenue Softness Worries Investors

261

EARNINGS Analysts Taking Down Earnings Estimates for Q4 2014

264

SHORT TERM TECHNICAL ANALYSIS

267

 

SUPPORT & RESISTANCE

267

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Gann Analysis .................................................................................................................................................................................................. 267 Boundary Conditions 268 Channels & Regressions 268 Fibonacci - Controlling Time Extensions
 

Gann Analysis ..................................................................................................................................................................................................

267

Boundary Conditions

 

268

Channels & Regressions

268

Fibonacci - Controlling Time Extensions

 

269

Elliott Wave

271

Bottom Line Big Picture

 

272

NEW-SENTIMENT - Consumer, Investor & Trader

 

278

NEW-Consumer Confidence - Conference Board

278

NEW-Consumer Sentiment - Michigan

283

NEW-Consumer Comfort - Bloomberg

284

NEW-Investors Intelligence

 

285

NEW-American Association of Independent Investors

 

285

NEW-National Association of Active Investment Managers (NAAIM)

286

NEW-Small Business Optimism

 

287

NEW-Percentage Stocks above 50 & 200 DMA

 

289

NEW-Margin

Levels .........................................................................................................................................................................................

290

NEW-Mutual Fund Cash Levels v S&P 500

 

295

NEW-OSCILLATORS & BREADTH: Indicators of Importance

297

NEW-NYSE Overbought / Oversold

297

NEW-OEX Open Interest (Puts/Calls)

298

NEW-TRIN

299

NEW-McClellan Oscillator

 

300

CHARTS OF NOTE

 

301

CHARTS Fear Barometer Diverges with VIX, CDS IG Index

 

301

CHARTS Extreme Complacency Seen Near End of Cycles

301

CHARTS Complacency Seen In PE/VIX

302

CHARTS Post Crisis Sentiment Profile Shows a Clear Ending Pattern

302

CHARTS Smart Money Flows

303

CHARTS Fed Assets versus Bullish Sentiment

303

CHARTS Macro Support Has Technically Broken Down

304

CHARTS US Surprise Index Setting Up for Downturn

304

CHARTS – The Public No Longer “Trusts” the Market – Feel it is Manipulated and Ineffectively Regulated

 

305

RESEARCH OF NOTE

 

306

SENTIMENT: US Households to Withdraw $430 Billion From Stocks In 2014

 

306

SENTIMENT: Elliott Wave's View from the Top

309

INTERMEDIATE TERM RISK ANALYSIS

313

 

CORRELATION & COMPLACENCY A PROBLEM

 

313

EVENT RISK A PROBLEM ....................................................................................................................................................................................

 

316

Q2 EARNINGS & THE “R” WORD

 

316

POLITICAL-ECONOMIC TENSIONS

316

CENTRAL BANK POLICY

 

316

ASIAN ECONOMIC SLOWDOWN SPILLAGE

 

316

PETRO$ CRISIS BREWING IN

316

NEW-AGGREGATED GLOBAL FINANCIAL RISK INDEX

317

BANKING RISK - LIBOR-OIS SPREAD (Updated)

 

318

BANKING RISK - TED SPREAD

 

318

CREDIT RISK - GLOBAL CREDIT DEFAULT SWAPS (Updated)

 

319

CREDIT RISK - EU CREDIT DEFAULT SWAPS (Updated)

319

CONSUMER RISK - HOUSING - RATE OF CHANGE (Updated)

319

ECONOMIC RISK - ECRI LEADING INDEX (Updated)

322

INFLATION

RISK

-

MONEY

SUPPLY GROWTH - M3 (Updated) ..................................................................................................................

323

INFLATION

RISK - MONEY

VELOCITY (Updated) ........................................................................................................................................

323

MONETARY RISK

- BANK LIABILITIES (Updated) ........................................................................................................................................

324

COST OF MONEY RISK - INTEREST RATES (Updated)

 

324

AGGREGATED RISK LEVEL

 

326

CHARTS OF NOTE

327

NEW-RISK: Speculation Has Taken Control of the Markets

 

327

NEW-RISK: MSCI versus World GDP Divergence - Unsustainable

327

NEW-RISK: High Yield Credit Risk At Elevated Levels

328

NEW-RISK: Active Hindenburg Omen

328

NEW-RISK: An Over-Levered Hedge Fund Index Ending ABC Consolidation Pattern

329

RESEARCH OF NOTE

 

330

NEW-RISK: Warnings Signs Are Everywhere

 

330

NEW-RISK: Hindenburg Signals a Warning

331

NEW-RISK: Americans say they're too broke to invest

333

RISK: The Biology of Risk

 

337

RISK: More Signs Of Bullish Excess

 

341

RISK: Markets Have Left the "Complacency" Phase, Have Entered Full Blown "Mania"

343

RISK: VIX Sends Message of Complacency

344

RISK: CS Warns Volume & DeMark Raise "Topping Threat" In Stocks

345

RISK: No One Will Ring the Bell at the Top

349

Cassandra's - New Additions to the List

 

356

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NEW- CASSANDRA: Sam Zell Warns Of Stock Market Correction On CNBC 357 NEW- CASSANDRA: Billionaire Carl
 

NEW-CASSANDRA: Sam Zell Warns Of Stock Market Correction On CNBC

357

NEW-CASSANDRA: Billionaire Carl Icahn warns on US stock prices

357

NEW-CASSANDRA: Soros Bets $2 Billion on Stock Market Collapse

357

NEW-CASSANDRA: Don’t Ignore Janet Yellen’s Stock Market Warnings 07-21-14 Fiscal Times

359

NEW-CASSANDRA: Doug Kass: We're Heading for a Bear Market So Plan Accordingly

362

CASSANDRA: Comstock Funds Weighs In

365

CASSANDRA:

Michael Lombardi Weighs In ...................................................................................................................................................

367

CASSANDRA: Ron Paul Portfolio, 'Craziest' we've ever seen?

369

CASSANDRA:

John Mauldin Goes Negative ..................................................................................................................................................

370

CASSANDRA: Hayman Capital Dramatically Reduces Risk

378

CASSANDRA: Byron Wien Warns "Oblivious Markets" Of 20% Correction

379

CASSANDRA: Harry Dent Warns Stocks to Sink More than 60% by End of 2014

379

CASSANDRA: Stanley Druckenmiller: "When You Get This Kind Of Rigging, It Will End

380

CASSANDRA: Mohamed El-Erian: "Prices Are Artificially High - It’s Time to Take Profits"

381

CASSANDRA: Felix Zulauf: World Headed Toward 1987 Style Market Collapse

382

CASSANDRA: Doug Kass: 'I'm Getting The Summer Of 1987 Feeling' In The Market Right Now

382

LONGER TERM - FUNDAMENTAL ANALYSIS

 

384

 

HIGHLIGHTS

384

NEW-VALUATION SUMMARY

384

NEW-VALUATION

387

VALUATION: Alternative Methodologies

388

NEW-FOUR SET CONSOLIDATED MARKET VALUATION INDICATORS

388

NEW-Crestmont from the Arithmetic

392

NEW-Cyclical PE 10

394

NEW-Q Ratio

399

NEW-S&P Composite Regression-to-the-Trend

405

NEW-REFERENCE METHODOLOGIES ANALYSIS

407

NEW-VALUATIONS -

411

NEW-VALUATIONS - An Overvalued Market By Any Measure

420

NEW-VALUATIONS Dividend Contribution to Total Return

424

Q3 EARNINGS Situational Assessment .............................................................................................................................................................

 

425

NEW-CHARTS OF NOTE

425

NEW-EARNINGS Estimated Earnings Growth Rate cut nearly in half since June

425

NEW-EARNINGS S&P 500 Aggregate Global

426

NEW-EARNINGS Relentless Squeeze on the American Pocketbook

427

NEW-EARNINGS Relentless Squeeze on the American Pocketbook

428

Q3 EARNINGS Wal-Mart Cuts Guidance Again

429

Q3 EARNINGS Fattening Profit Margins Still Driver of Earnings Growth

430

RESEARCH OF NOTE ....................................................................................................................................................................................

431

xNEW-EARNINGS - Barclays Warns "King Dollar" Could Crush Earnings

431

xNEW-EARNINGS - Coming Shift in Expectations

436

xNEW-Q3 EARNINGS Estimated Earnings Growth Rate Cut Nearly in Half since June 30

439

xNEW: Q3 EARNINGS Only 37% of Companies Are Seeing Rising Sales Estimates

441

Q3 EARNINGS EPS Estimates are Falling for Most Stocks in the World, Driven by Europe

445

Q3 EARNINGS Wal-Mart Cuts Guidance Again - Blames Obamacare

449

Q3 EARNINGS Cisco Beats Earnings, Announces Massive Layoffs

451

Q3 EARNINGS Everything Cisco Is Saying About Emerging Markets Is Depressing

452

Q2 EARNINGS Hidden Messages

454

Q2 RECAP FACTSET

454

Key Metrics

454

Key

Observations .........................................................................................................................................................................................

 

455

Q2 2014 Earnings Season:

457

RESEARCH OF NOTE ....................................................................................................................................................................................

458

Q2 EARNINGS Estimates Taken Down from 6.8% 03-31 to 4.9%

458

Is the S&P 500

459

CHARTS OF NOTE

460

NEW - CHARTS Finance the Biggest Source of Corporate Funds rising from 19% to 30%

460

NEW - CHARTS Average Age of Private Fixed Assets

461

NEW - CHARTS Percent of Families With Business Equity

461

NEW - CHARTS Percent of Families With Business Equity

462

NEW - CHARTS – New England Patriot’s NFL Franchise Valuation

463

NEW - CHARTS US Equity Market is Not Outgrowing the Economy AS Measured by the Coincident

464

NEW - CHARTS Deviation of Earnings Above / Below Long Term Growth Trend

465

NEW - CHARTS – S&P 500, Moody’s Baa Corporate & 30Y UST

465

NEW - CHARTS Corporations Carrying Higher Levels of Leverage than a Few Years Ago

466

NEW - CHARTS US Corporate CFROI (Cash Flow ROI)

467

NEW - CHARTS Weakening Sector Retunrs

467

NEW - CHARTS SPX, Corporate Profits versus Employed Population %

468

NEW - CHARTS Executive Incentives Distort Earnings

468

NEW - CAPITALIZATION Market Capitalization as a % of Nominal GDP

469

NEW - CAPITALIZATION Market Capitalization Adjusted by Gold and CPI

470

NEW - CAPITALIZATION Market Capitalization versus Total Federal Reserve Assets

471

NEW - CAPITALIZATION Total Market Capitalization versus M2

472

NEW - CAPITALIZATION Total Market Capitalization versus Monetary Base

473

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NEW - CAPITALIZATION – Total Market Capitalization versus Gross Federal Debt 474 NEW - CAPITALIZATION –
 

NEW - CAPITALIZATION Total Market Capitalization versus Gross Federal Debt

 

474

NEW - CAPITALIZATION Market Capitalization

475

NEW - CAPITALIZATION Regional Corporate Loss Comparisons Problems in Japan

475

CHARTS 7 Year Total Return Cycle

476

CHARTS Profit Margins Shrink as Proportion of GDP

476

CHARTS

Q1 Earnings

Pre-Announcements ................................................................................................................................................

477

CHARTS Q1 Earnings Taken Down Dramatically

 

477

CHARTS Q1 Earnings Already Taken Down By 5% since January

478

CHARTS Positive & Negative Q1 Pre-Announcements

478

CHARTS Q1 Revenue Slippage in Last 60 Days

479

CHARTS Forward 12 Month EPS vs Price: 10-Year

480

CHARTS Forward 12 Month EPS vs Price: 10-Year

480

RESEARCH OF NOTE

482

FUNDAMENTALS Long Term Return Trends

 

482

FUNDAMENTALS Profit Margins Contract as a Percentage of GDP

484

FUNDAMENTALS Stagnant Wages a Major Contributor to Profits

486

FUNDAMENTALS Worsening risk/reward fundamentals in US corporate credit

488

BUYBACKS Situational Assessment

 

492

 

CHARTS OF NOTE

492

 

NEW-BUYBACKS Shares Outstanding Back at 2000 Level

 

492

NEW-BUYBACKS Largest Volumes of Buybacks by US Listed Corporation in Last Year

492

NEW-BUYBACKS Corporations Are No Longer Investing But Rather Financial Engineering Stock Prices

 

493

BUYBACKS Q2 Drop-Off Closer to Normal

 

494

BUYBACKS Borrowing to Buy back Shares

494

BUYBACKS Cyclical Nature of Buybacks Evident

494

BUYBACKS Major Q2 Repurchases

495

BUYBACKS Major Q1 Repurchases

495

BUYBACKS Quarterly Repurchase & Buyback Yield

496

BUYBACKS US Corporate Cash versus Buybacks

497

BUYBACKS Net Debt/EBITDA of American Non-Financial Corporations

497

RESEARCH OF

NOTE ....................................................................................................................................................................................

498

NEW-BUYBACKS - Companies Spend Almost All Profits On Buybacks

 

498

NEW-BUYBACKS - Buyback At Biggest Pace Since 2007

502

BUYBACKS - Buyback Party Slowing

504

BUYBACKS - Buyback Party Slowing

509

THE $2T TAX RUSE – It’s a Free Ride for US Corporations

 

514

UNPRECEDENTED BUYBACKS LEVELS

 

514

A FREE TAX

516

GENERIC TAX EXAMPLE ...........................................................................................................................................................................

 

516

TARGETS ................................................................................................................................................................................

521

CONCLUSIONS

 

522

 

MARKET MESSAGE

522

I- DEFINING CHARTS

530

Defining Chart #2 - Finding the Longer Term Super Cycle Pivot “b”

 

530

Defining Chart #3 - The Big “M” and Super Cycle “b”

532

Defining Chart #3 - The Big “M” and Super Cycle “b”

532

Defining Chart #4 Intermediate Term Topping Process

533

II- TARGETS

535

III - MONTHLY RISK & PATTERNS

 

536

RISK .................................................................................................................................................................................................................

536

NEW-CHARTS 8 th Hindenburg Omen Within 9 Days First Occurrence in 25 Years

 

536

NEW-CHARTS Unprecedented Surge in Energy CDS

537

NEW-CHARTS Margin Financing Underpins China Stock Rally

537

NEW-CHARTS Chinese stocks +33% in 6

538

NEW-CHARTS Leverage Loan Ratios Approaching Pre-Lehman

538

PATTERNS ......................................................................................................................................................................................................

539

NEW-CHARTS World GDP Growth Does Not Support Stock

 

539

NEW-CHARTS S&P 500 versus Q4 US GDP Expectations

539

NEW-CHARTS WTI at 2009 Levels and Marginally Above 2008 Crisis

539

NEW-CHARTS Credit Has Been Signaling a Clear Problem Ahead Since Early

540

NEW-CHARTS – Current Economic Cycle is Getting “Old in the Tooth”

541

NEW-CHARTS Signs That Something Is Broken Somewhere Bonds, Oil versus Stocks

541

NEW-CHARTS Economic Activity and CRB YoY Rapidly Diverging

542

NEW-CHARTS Federal Reserve Assets versus Stock Prices

542

NEW-CHARTS 10Y UST Disconnected from Fed Expectations Deutsche Bank

543

IV STUDIES

544

 

CHARTS OF NOTE

544

 

NEW-ENERGY Dubai Stocks Dive by Most Since 2009 Crisis as Oil Powered Gulf Bourses Crash

 

544

NEW-ENERGY Most US shale play costs are below $80 a barrel – ‘Challenged’ when approaching $60

544

NEW-ENERGY Breakeven for All Global Oil Projects

 

546

NEWS-STUDY: SHRINKING LIQUIDITY

547

 

CHARTS OF NOTE

547

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NEW- LIQUIDITY – Central Bank Liquidity Injections 2009-2014 ................................................................................................................ NEW- LIQUIDITY – Austrian Money Supply %

NEW-LIQUIDITY Central Bank Liquidity Injections 2009-2014

................................................................................................................

NEW-LIQUIDITY Austrian Money Supply % Change YoY Outstandings-1

.............................................................................................

NEW-LIQUIDITY Austrian Money Supply % Change YoY Outstandings-2-Defining Trend Support

......................................................

NEW-LIQUIDITY Austrian Money Supply % Change YoY Outstandings-3-Consolidation Triangle

.......................................................

NEW-LIQUIDITY Austrian Money Supply Historical Patterns versus SPX-1-Consolidation Triangle

.....................................................

NEW-LIQUIDITY Austrian Money Supply Historical Patterns versus SPX-2-Triggers

............................................................................

NEW-LIQUIDITY Austrian Money Supply Potential Relationship Triggers

..............................................................................................

547

548

548

549

549

550

550

STUDY: BUYBACKS Showing Early Signs of Weakening

.................................................................................................................................

CHARTS OF NOTE

.........................................................................................................................................................................................

551

551

NEW-BUYBACKS Cash to Stockholders Exceeds 90% of

Profits...........................................................................................................

551

NEW-BUYBACKS Stock Repurchases Surge 30% in Q3

NEW-BUYBACKS Stock Repurchases 2

nd

Highest on Record at $145B

.......................................................................................................................

................................................................................................

NEW-BUYBACKS 2914 YTD Stock Repurchases By Corporation 20 Corporations Over $4B

...........................................................

NEW-BUYBACKS Operating EPS With / Without Buybacks

...................................................................................................................

NEW-BUYBACKS – Sales & Revenue Doesn’t Support Reported EPS Due to Buyback Distortion

.........................................................

NEW-BUYBACKS S&P 500 Buyback Index versus S&P 500

.................................................................................................................

551

551

552

552

553

554

  • V - TRIGGER$ ZONES ..........................................................................................................................................................................................

555

VI - DRIVER$ & BIA$

.............................................................................................................................................................................................

556

VII- QUARTERLY KEY METRICS & ASSESSMENT UPDATE

.........................................................................................................................

558

A - LONG TERM: Fundamentals

.....................................................................................................................................................................

558

FUNDAMENTALS ........................................................................................................................................................................................

560

B - INTERMEDIATE TERM: Risk

....................................................................................................................................................................

563

CANARIES-RISK

.........................................................................................................................................................................................

563

CORRELATION & COMPLACENCY A PROBLEM

....................................................................................................................................

564

  • C - SHORT TERM: Sentiment

.........................................................................................................................................................................

567

VIII- GORD'S VIEWS & OPINIONS

.......................................................................................................................................................................

570

SENTIMENT & CONFIDENCE - NERVOUSNESS

........................................................................................................................................

570

MARKET AT HISTORIC HIGHS

.....................................................................................................................................................................

575

The Intrinsic Enterprise Value

......................................................................................................................................................................

Stock Valuations are based on a Discounted Free Cash flow. EBITDA is Cash

flow. ...............................................................................

580

581

How Long Will Labor Tolerate this or Survive on Shrinking Disposable Income?

......................................................................................

Have a Look at the Market Deflated by QE

.................................................................................................................................................

582

582

8

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