JOHN MAULDIN: 40% CORRECTION COMING
14 April 2010 by Cullen Roche
22 Comments
John Mauldin, president of Millennium Wave Advisors LLC talks about the potential for a recession in 2011 and a 40% decline. I can’t recall too many market calls from Mr. Mauldin (or perhaps I haven’t been paying close enough attention), but this is a bold one:
i don’t see the repeal of the tax cuts and the winding down of the stimulus causing a double dip recession leading to a 40% decline in the market. this guy is the chesse stands alone on this one. it is one thing to be conservative, but this is pretty extreme.
Agreed….
Well, think about how many people have made and are making a killing in this market of the last year. Think about how many people have their finger on the sell button just waiting for a sign of trouble. I’m waiting and I’m sure there are millions like me, saying “next time, I will sell and just buy back lower rather than riding it out”
When this thing turns, and it always does (give me a bad LEI number and watch the sell orders roll in) everybody will try to sell. The fall will be quick, and extreme. 40% is not as extreme as it sounds.
more people looking to get in than get out, imho.
“more people looking to get in than get out, imho.”
This is wrong. If this was the case, volume would be higher. Volume is low because the people who bought in over the last year are holding on and not selling. The few buyers that are out there are forced to bid up the shares in order to get some, so prices go up, on very light volume.
Wait till the sellers start selling and the buyers dry up. Then we will see some action.
the lookers are still looking…staying out because prices still are going up…just ask about half the posters on this site
That’s just not true Chris. Fund managers are 52% overweight stocks now vs 33% in March. AAII is 52% bullish. State Street says institutions are overweight. Mutual fund flows were $123B for the first quarter – the most in 12 months. Flows for March were up 1.6B after outflows in February. April is certainly seeing more inflows.
There is no evidence backing your comment that investors are just sitting idle on the sideline not doing anything. They are getting invested and getting VERY bullish.
tpc agrees with me? stop the presses!
ooh, he’s violating a cardinal rule of forecasting—If you predict a number never predict the time. If you predict a time never predict a number. He’s in trouble.
Wasn’t April 17th, 1930 the Sucker’s Rally peak after the 1929 crash?
http://www.businessinsider.com/henry-blodget-the-greatest-suckers-rally-in-history-play-by-play-2009-9#april-17-1930-the-end-20
Bad things sometimes happen in April, but, if they don’t happen THIS April, it’s absolutely time to throw in the towel and sing “Happy Days are Here Again!”
Honestly, if there’s a 40% correction in 2011 after the market has gained another 20% from where it is right now, why wouldn’t investors want to participate in that 20% runup? There is plenty of opportunity to collect profits and/or flip short if the trend changes next year. I think I’ve finally had enough of worrying about what MIGHT happen.
I’ve spent the last year worrying about the next market cliff (and, in fact, trying to anticipate it and profit from it), and it has been the worst investing experience of my life. So I don’t think I’m going to listen to any more permabears until the trend changes back in their favor.
Despite all tricks being pulled out of hat, Dow/gold ratio going nowhere. Pretty clear where we are in secular trend. 40% drop is a little bit benign to my taste. SPX will be traded well below 666 one day. Or gold goes to 10K. If they pick one way or another I really couldn’t care less.
Please people this man is not alone in his prediction. Yes timing will be an issue , but there are a number of others that have predicted a double dip or major correction for that time frame. Roubini predicted problems in Jan of 2009 for the 2H of 2010. Marc Faber and Jim Rogers are both expecting major corrections in the same time frame. Steve Keen and Prechter as well as Karl Denninger, David Rosenberg, Richard Russell, John Hussman to name just a few more have all said they believe that there is a high probability of a double dip.
To my knowledge Jim Rogers never said there would be a double dip in the second quarter. He does believe things will ultimately fail, but he says he isn’t buying or shorting stocks right now
TPC,
I agree and that is why I said that timing is an issue, but none other than George Soros is out today pointing out that we are facing a much more massive credit crisis than the one we are still in now.
Where is the value in todays market? Current PE on SPX is sitting at 22, the mean for the last 130 years or so is 16. Current dividend yield is at a juicy 1.85%, the mean for the same period is 4.37%. But those are antiquated, obsolete metrics, aren´t they? (as they were in 2000 and 2007). Bernanke is seeing a bubble form right in front of his eyes, watching like a deer in the headlights as the S&P gallops 80% in 13 months without even seeing as much as a 10% pullback anytime in between, that’s the natural ebb and flow of markets right?
From a risk/reward standpoint, reward certainly seems very limited considering 10% on the (overly conservative) unemployment figures, interest rates at ground zero and some other compelling items like the 200 week moving average just overhead at 1225 on the S&P. This certainly feels like something to suck in all the pension funds for another schilacking in the near but no too far off future.
billw, what’s your point?
The point was that John Mauldin is not out in left field by himself in his high probability prediction of a double dip. He is in the company of some of the best investors and analysts in the world. many of whom predicted the last implosion.
I can’t believe your consistency – perpetually pushing your bearish bias despite the biggest bull market in history. At least you’re consistent – consistently wrong. Have yu ever made money, on anything?
I’m a buyer at the open.
I hope you’re not referrng to me….I said the market would rise 18% last year and would rise in H1 this year. Both calls were BULLISH an dead right. I’m short from around 1165 in my macro portfolio and it’s been a bad call, but permabear I am not. How else would I have 95% total returns over the last 4 years when the s&p is negative (fully audited with 2+ sharpe and sortino ratio….)
smoked…
I don’t think he’s making a 40% drop call.
What he’s calling is that by Q1 2011 the economy will be facing a number of very strong headwinds led by sustained high unemployment and cutbacks in non-Federal government spending. This is his call and I think he’s absolutely right about this.
Mauldin says that there is only a 50% chance of a drop occuring as a result, and that the resulting drop would be around 40%, based on historical plunges. That’s significantly different from saying that there IS going to be a 40% drop.
People, this is pathetic. A 50% chance of a 40% drop? Talk about a 50/50 flip of the coin. This guy, while not a bad person (i’ve read him on and off for years) is a publisher. You get attention and headlines by big bold bad statements. Given the odds he’s willing to take 50/50 (either it will or it won’t) what if i said the market may be up 60% by the end of the year. I’ll give it a 50/50 chance (either it will, or it won’t)….This is sheer media grabbing b.s…. The answer, and the only REAL answer is NOBODY KNOWS. This guy and the rest of them were peddling the “Goldilocks Economy: Not too hot, and not too cool” back in the sideways 2004-2006 time period. Larry Kudlow was another one. These same clowns were also the ones saying the subprime is not an issue, the old standby that people do whatever they can to stay in their homes, etc.etc.etc…. Look it up. All these bold statements are hogwash. Soooooo many people sold out in the first quarter last year because “the markets going to 3000 on these guys calls”….Wrong Again. I’m not saying don’t have an opinion and position your portfolio around your opinion, by all means do so. But in my investing in both bad markets and good over decades i’ve always remembered the lesson I learned as a kid starting out. The lesson is to always remember “What if I’m Wrong” and position yourself accordingly. The fact that sooo many pundits are saying the market is about to tank leads me to believe that this market may keep running. But again “Who knows”….Position yourself for “What If I’m Wrong” for both a positive or negative scenario and keep the hubris to a minimum and you’ll be ok.