Michael A. Gayed: Very suddenly, it feels like we are in the midst of a perfect storm. Our ATAC models keeping the portfolios we manage completely out of the stock market.
November 15th, 2012
from Michael A. Gayed:
The decline in the S&P 500 and worldwide equities has been unrelenting so far this month, as the corrective risks I highlighted Oct. 1 and in every single writing since then have abruptly ended the reflation trade post QE3. On Nov. 5 I began pounding the table to ” forget the elections ” on the stark warning price was signaling through the return of the deflation pulse. Our ATAC models used for managing our mutual fund and separate accounts have sensed this for weeks, keeping the portfolios we manage completely out of the stock market.
Very suddenly, it feels like we are in the midst of a perfect storm given European austerity protests and public disputes over how to handle Greece, the threat of tax hikes under the Obama administration on dividends and capital gains, and the question of whether the Fed is ” fighting itself ,” as I speculated in my last writing in terms of actually causing deflation expectations to rise by removing a sense of urgency for money to move throughout the economy. Indeed, one could argue that the Fed has destroyed the ultimate weapon of all — the element of surprise.
This is not just a U.S. story. Certainly the fiscal cliff, which has been known for some time as a risk to the markets, is causing distortions within intermarket trends to take place. However, Germany appears to be in the early stages of weakening at a faster pace than the U.S. China and emerging markets, which have otherwise been strong, appear to be breaking down and may be vulnerable to another period of lagging….