Today I renewed my $500 yearly subscription to a site that I find valuable. I thought hard about it and decided that it was worth the money. Then I come back here and read posts like the above and think, "If Bill charged, what would I be prepared to pay?" I would have to admit that what I have learned off these pages would eclipse what I have learned at virtually every other source -- maybe put together!

When I went to university (many years ago)I had a friend who could take the most confusing and difficult concepts, and in a few minutes put it into words that I could understand and bring meaning to an otherwise meaningless class.

Bill, you have that same ability. Thank you for everything you do and the incredible amount of time you spend doing it.

Amen, Bill.

In a very "informal" way, a lot of the ETFs appear very 'stretched'...FXI, TRF, IVW, OEF, and so on. The problem with shorting some of them, like TRF today for example, is the thin trading that makes any kind of disciplined risk control very difficult. If I had 'unlimited' resources, buying low volatility calls and shorting the common makes for a much lower risk trade.

Best,

Ron

I thought this was interesting from
http://www.marketwatch.com/News/Story/Story.aspx?guid=%7B8B5D12C8-451F-4EF7-B697-A8FB3D3D2B90%7D&siteid=mktw&dist=nbc

SAN DIEGO (MarketWatch) -- If George Muzea is right, Monday's decline is just the start.
Muzea, who runs Reno-based Muzea Insider Consulting Services, has been negative on the market for just two weeks -- the first time he has been bearish since July 24, when he turned positive.
Muzea makes market calls based on the activity of corporate insiders. He's considered the grandfather of the insider-tracking industry, generally keeping a low profile to all but his high-paying hedge fund clients.
We speak every now and then. When we spoke last week he gave me an earful that I only wish now I had published then. (Such is life! The Thanksgiving break was calling.) But, according to Muzea, this is likely the beginning of a sharp and steep decline not unlike the one that hit the market last spring -- and maybe worse.
The only thing he doesn't know is whether, as is often the case, he is a month or two early. The wild card on timing, he says, is the impact 401k money will have inflows in January, which could give the market one last gasp into early spring. He'll know, he says, if insiders stop selling early in the year.
Muzea notes, however, that insiders have been finding less value in the market over the past eight years. "Every time you have a low," he says, "you have fewer and fewer stocks with positive patterns."
Before you go calling this a scare tactic on a down day, keep that Muzea has a record, and he is basing his forecast on a history of following the market as it relates to the actions of insiders. "If you want to lose money over a long period of time," he says, "buy when insiders are selling and the public is bullish." (Regular readers will remember his name from a few very good calls in the past.)
Adding to the intrigue this time, he says, is the increasingly powerful role of electronically traded funds. "The players and numbers of ETFs are expanding exponentially, and they're putting that money into EFTs" that track indices like the Nasdaq 100 or the S&P 500. The most disconcerting part of the story, he says, is that these investors what have flocked into the ETFs don't need an uptick -- or a rise in prices -- to sell them short. "If the market is vulnerable right now," he asks, "what would happen if a geopolitical event or something else happens? How fast would it take for the Dow to go down 500 or 700 points, with everybody going short to protect themselves? When they start selling these, who is going to buy them?"
The concern, of course, is that the answer will be: Nobody. End of Story

I haven't found large insider selling to be a reliable indicator for the future direction of the markets.

Insider buying is more reliable IMO.

In fact a lot of big insider sales occured in October - but I bet they are kicking themselves now.

It is hard to call the market when the world is awash in so much money. All Asian indicies are up nicely as I type this because apparently the world economy is humming (insert sarcastic tone). Markets will eventually find equilibrium but until then it's a casino.

Do insiders really buy? -- when they can get it for free, even back-dated? I've always wondered whether insider buying wasn't financed by the company or otherwise faked.

Ron -

Unless things have changed, shorting any but the most heavily traded ETF's is hard for individual investors to do. Shwab always told me they had no shares to lend out. Dave Fry's ETFdigest.com (subscriptioin site) has been pushing on this issue, but last time I checked to no avail. (Institutions CAN short many more ETF's, because they operate at volumes which induce issuers to create more shares of the ETF in question.)

Ron -

Unless things have changed, shorting any but the most heavily traded ETF's is hard for individual investors to do. Schwab always told me they had no shares to lend out. Dave Fry's ETFdigest.com (subscription site) has been pushing on this issue, but last time I checked to no avail. (Institutions CAN short many more ETF's, because they operate at volumes which induce issuers to create more shares of the ETF in question.)

Bill -

GREAT POST! For the first time, I see your overall core strategy: use cycles in the sector ETF's to tell you when to prepare to buy Cara 100 stocks in the relevant sector.

Questions:

- How important is the sector cycle top in the sell decision?

- When the sector hits a cyclical bottom, and the relevant cara 100 stock reaches RSI7's <30, do you use technical indicators to time your precise entry point? (As you've said, "picking bottoms is a mug's gaame".) On the other hand, can't a Cara 100 flatline along a bottom, or fall farther?

- How does this approach apply to non-US Cara stocks? I presume Canada, as part of the North American market, might be guided by US sector ETF's, but Asia? Europe? Latin America?

- What % of a portfolio do you dedicate to this "core strategy" vrs. special situations like junior miners?

Bill, great post. You are justifiably indignant as usual!

I spent some time yesterday with John Hussman's recent commentaries and not surprisingly he is on your wavelength. Not sure if you read him but he harps on the record margins, high P/E, and speculative action as clear indications of an overvalued, overbullish, and overbought market.

-Motts

I believe it has been well documented that there is little correlation between P/E's and the stock market's direction.

There is a strong correlation between liquidty/ credit with stock market direction.

If the stock market does not go down as Hussman and similar defensive funds expect - they will be forced to finally remove their hedges thus driving the market even higher next year.