Reasons to leave the market

If you own any stocks, you might be feeling good about all the happy-happy talk regarding the economy and the ostensible "recovery." You might have made up for at least some of your earlier losses, and you might not be feeling as bad about the Dow and the S&P.

I'm not so optimistic. In fact, I am very pessimistic verging on horrified. Here are some reasons why:

Low Volume

Share prices may be up, but that's based on very little buying and selling. Many are staying on the sidelines. True "bull market" rallies should have good trading volumes.

Insider Selling

When the big executives at corporations sell their stock, they are required to file reports about this, to prevent illegal / manipulative insider trading. The vast majority of those filing such reports -- almost 95% -- are selling, not buying.

Bad Time of Year

September and October are historically bad months for stocks.

Irrational Rally

In my opinion this "bear market rally" started out as manipulation (using TARP funds or similar, as channeled through Wall Street, with the help of the Plunge Protection Team) and eventually sucked in enough investors to take on a life of its own. It's never been based on fundamentals. How is an economy based on consumer spending supposed to grow and prosper, when 1 in 5 workers are unemployed or underemployed? Riddle me that, Paul Krugman.

1930

There was a massive rally after the 1929 stocks crash, which lasted well into 1930. It was accompanied by happy-happy talk from the Treasury Secretary, the President, economists, bankers, and captains of industry. The glad old days were here again-- until they weren't, and stocks crashed to below their 1929 nadir.

Trailing P/E Ratio

The "P" is the price of a share of stock in a company. The "E" is how much that company earned per share (total earnings divided by number of shares of stock). So in other words, if you pay $30 for a stock and it earns $2 per share, the P/E or price-to-earnings ratio is 15. That's about average, historically. Back in 1999 at the height of the dot-com bubble, the average P/E for the whole S&P 500 reached an all-time high of about 44. And today? Today it's 144. Talk about overvalued.

Elliott Wave Analysis

There's a school of "technical analysis" (chart-reading) which is fairly well respected, and which is predicting extremely dire times ahead for the stock market, sometime in the next few months. It's beyond me to evaluate the track record of the Elliott Wave school, I can only say they're quite popular. When I say "dire" I mean -- depending on the analyst -- predictions of up to a 90% fall in stock prices. I.e. total catastrophe, and the end of 401k plans.

Funny Business

I've been hanging out and reading lots of comments over at Zero Hedge, where many of the commenters are quite expert in the financial markets. The general consensus is: Everything Is Broken. Nothing is correlating like it's supposed to, manipulation is rampant, "portfolio theory" and "hedging" are dead because nothing is working the way it usually does, and many totally ridiculous moves in stocks and commodities are occurring daily. In short, anyone not plugged into the inside circle, that little cabal of Treasury / Fed / Goldman men, is just a pathetic sheep to the slaughter. I provide an illustrative comment, though it may sound like gibberish to some of you:

I'm so fucking bored of this market - without sophisticated heat mapping metrics and explosive liquidity detection behind the bid it is a waste of time trying to trade this market with a balanced risk profile. Forget Alpha, Beta, Delta, Gamma Vega, Rho, Theta - Hedged caution long/short or call/put portfolios are useless - no correlations in anything- THIN VOLUME spiking the fucking FOREX MARKETS!! I have been out on the sidelines for months and no no rational risk prioritising strategy has even worked in theory for longer than a session or so. WHAT A JOKE THIS MARKET IS!!

Truly truly truly flip a coin and save your self the time spent researching and theorizing

Well, hey, that sounds like a healthy situation. Everything they learned in finance school is out the window. You think you can do better than these guys?

Get out, if you can get out... in my humble opinion. Unfortunately I cannot claim Treasuries are a great alternative, as the dollar could be toast within months, so if your money is in a 401k you may be screwed. (If you own a 401k and you are not irate, you are not educated about said 401k, my friend. They are a scam.)

Hold your breath, we're going down again....