“RISK IS A FOUR LETTER WORD”
The Dirty Dozen Risks, Plus a Free 13th Risk;
A Baker’s Dozen
Here’s some risks I identified earlier today, perhaps the market “will climb a wall of worry,” or perhaps everyone will panic and there will be either a mini-selloff (what I describe as a 4 to 7 percent pull back) or a market correction (of trading down 10 percent or more) in the next month or two? A pull back might be healthy (after such strength over the past 4, 6,12, and 24 months) and bring in some new investors.
1. Greece is a nuisance and a trouble maker; Germany’s in too deep with bailouts of Greece, and will try to convince Greece to not leave the Euro Zone in the next few months – There will be civil and political unrest in Greece
2. If Greece leaves the Euro Zone, worries of Italy and Spain also leaving will likely overwhelm the markets (PIIGS are trouble makers- Portugal, Italy, Ireland, Greece, and Spain)
3. Ukraine is becoming a new geopolitical wild card
4. Russia’s nonsense, and Putin’s reign will come into question, leading to political destabilization in Russia
5. Oil’s potential decline and further pressure on the Energy Sector (hopefully energy prices will stabilize and/or increase)
6. Market is nearly at highs, the VIX is getting low, and the market could have a mini-correction if volatility as measured by the VIX increases
7. Rising interest rates are coming at the short end, and throughout the rest of the entire yield curve, producing losses in long term Treasuries
8. North Korea and its recent Sabre Rattling and weapons testing
9. Venezuela and its destabilization due to low and lower oil prices, the civil and political unrest will be nasty
10. ISIS and anti aircraft carrier missile launch testing
11. Barron’s recent report on the risks of weakening consumer spending and weakening consumer sentiment could prove to spook the markets as the consumer is the biggest share of GDP
12. Seems as though corporate EPS growth rates are slowing
13. Don’t forget that the economies of China, Japan, and Europe are slowing down much faster than the USA
Swim at your own risk!
I hope I’m wrong about a selloff, but I wanted to look into my crystal ball and identify some risks that could become issues later.
I think Greece will continue to worry the market, and their problems are hardly over, or solved. The “can was kicked down the road” in the last week or two. Eventually, Greece may shock the market by defaulting on its debt and by leaving the Euro. Expect more volatility due to Greece (due to its belligerence, total idiocy, governmental and private sector corruption, and total incompetence) going forward. Isn’t Greece the land of the most tax evaders ever, in modern contemporary history? It’s hard to have sympathy for an entire society of tax evaders. Italy is very similar also with a huge population of tax evaders. PATHETIC!
Happy trading!
Andrew G. Bernhardt
PS- Another thing that worries me lately, is the divergence between the etfs RYE & SPY. In other words the etf of the S&P500 Equal Weight (etf RYE) versus the (regular or traditional, market capitalization weighted) S&P500 and its etf being SPY, is rather troublesome. RYE has been selling off a lot versus SPY. This means that the larger capitalization stocks have been increasing while the smaller components of the index have declined substantially. This means that the smaller members of the S&P500 have been selling off quick, versus their heavyweight counterpart members, who have been rising fast, to offset this, since the indices are at roughly all time highs. This can’t continue forever. Either the smaller components of the S&P500 are very cheap and will increase substantially, or the larger stocks in the S&P500 are overvalued and will decline substantially. This divergence of RYE & SPY is just very troublesome to me; I believe in a healthy market they should be moving more in lock-step together. Notice the S&P 500 Equal Weight Index also sold off in advance (like an early warning indicator) before to the market turmoil of 2007-9. [PRESS HERE] to see a link for a chart of what I mean (you’ll be able to manipulate the dates of this chart).
Bernhardt Capital Management LLC 