Several weeks ago I watched a video where Maria Bartiromo of CNBC interviewed Gary Shilling of A. Gary Shilling and Company. Bartiromo was soliciting Shilling about his opinion on the housing market, and as you can imagine, Shilling was less than sanguine, and in fact, he was calling for further declines in prices. Shilling was clearly at odds with other analysts, and Bartiromo asked (and I paraphrase): "You realize your opinion is at odds with all the other analysts out there?". Shilling's response (and I paraphrase again): "What good is an opinion if it is just consensus?"
I love it!
On Monday and Tuesday of this week the markets were one banana peel from falling off a cliff. I am sure bulls were wondering (and sweating) what they were doing holding stocks at such lofty levels. I am sure many were thinking, "why didn't I sell last week?". Ahh, then comes Wednesday and Thursday, and we can all breathe a sigh of relief as stocks moved back to their highs. Whatever actions the bulls wish they had taken on Tuesday are gone.
So what has changed? From a sentiment perspective, nothing has changed. The bulls remain bullish to an extreme degree and corporate insiders actually increased their selling over the prior week. I realize that my opinion is not consensus, but now is not the time to "breathe that sigh of relief". It would seem to me that taking action is more prudent, so I still stand by what I wrote on August 13, 2010: "If the market hasn't topped out already, it should do so within a couple of percent of the recent highs. Rallies should be sold and stops tightened up. The market is prone to sudden sell offs. There will be better risk adjusted opportunities to buy in the future."
If my opinion changes or if the data changes or if the price actions causes me to re-evaluate that opinion, I will be the first to let you know.
Despite losing 1.5 market days to Thanksgiving the pace of insider selling continued at an impressive clip last week. Sellers outnumbered buyers 3-to-1 and the number of sellers fell -15% week-over-week compared to a -32% decline in the number of buyers." The current "entire market" value is not extreme on a relative basis but clearly, it is extreme on an absolute basis.