Yves Lamoureux has been on a roll recently. He made a prescient China Top call in 2007 (reported here), then turned bullish early this year and says he is up 25%. In October he predicted stocks 'crashing up' (reported here) and they have. Now he has become cautious. His current view on the S&P is reposted below. But first, a few comments from him:
We find that the study of the yield curve has a powerful predictive ability. Where we disagree with most is on the size of the drop. Market opinion would have this ending wave drop in a C wave fashion. Drops of over 50% would therefore be possible. Our count view this pullback as a wave 2. The yield curve agrees with us on this matter.Our tactical approach now is to avoid the S&P as we see it likely to turn out as being a big disappointment for returns in 2014.
Instead of US Equities, he is looking into emerging market equities. Also, he suggests now is the time for a short-term play back into gold. He sees a rise to $1500 before it falls back to his target of $1000 in 2014.
Here is his reasoning on the S&P:
How often have you seen us get worried this year on stocks? Never! We held a courageous bull stance all year and never let go. This was taped in January with Jeff Macke.
This cannot be a permanent state of affairs. Many studies are pointing to risk ahead. We would prefer to leave some upsides to others. The best part about reducing risk is also pocketing handsome profits.
Conditions are quickly deteriorating. We did preview the chart of money velocities. It is falling to such an extent that we are shocked. Perhaps the uncertainty created by taper is to blame in part. We are asked about our view of bonds if stocks fall.
We mentioned in the past that this would become a nightmare for asset allocators. We believe in the positive synchronicity of both bonds and stocks to revert to an historic correlation. We think bondscan fall while stocks fall too.
The bond bear is really just at the onset. There is incredible damage ahead for people who have enjoyed bonds for decades. To them, there are no other alternatives certainly not stocks. They will suffer in the same way that stock holders did for a little bit more than the last decade. We had been over the same period very wary of stocks and had always preferred the safety of bonds. Oh my! How things change.
The rotation out of bonds to stocks will continue and remains the foundation of our strong bull market case in stocks to come. We think we are now providing investors ample time to re-balance portfolios accordingly. Now is the time to take some evasive action!
We understand that we cannot go to cash in a big way as clients will be less than delighted. Guess what? People who feared the market, now, want a bigger stock representation. We try to use our contacts intelligently to measure the pulse of investors. We think this represents applied behavioral studies at its best. We feel that this high is a perfect point to take money off the table.
We continue to be huge bulls on Asia. We think that the Shanghai market has begun a multi-year bull market. Our advise stands to rotate out of expensive markets like the S&P and go to emerging markets that now offer tremendous cheap values.
One of the really big mistake of retail investors is to feel comfortable with their own regional markets.
This will be a costly mistake for years to come. As many emerging markets appear to go into the next stage of growth. They will also gain an exponential revaluation. They will go into bubble mode!