Traders are waiting for the signals to move forward. However, although market sentiment is pessimistic, market participants have plenty of cash to pick up bargains in case of a sizable market pullback or even crash. But while everybody is waiting, there are no sellers to execute the anticipated sell-off. Long-term investors seem to have no further intention to liquidate stock holdings since last market pullback before the rally triggered by the Federal Reserve open-ended mortgage backed securities buying program. Market manipulators cannot create panic selling since investors have learned from the panic selling in last year. It is now much more expensive to buy back the shares dumped in last year. And the investment return from dividend of stock holding is much more than the return from cash or equivalent holding. Investors have a low proportion of portfolio in equity stocks.
Looking forward, market will remain quiet and individual news may cause jitter. The risk of market crash is low. The large pool of capital waiting for market entry point can provide support if market retreats. So far market movement in the year indicates a rising market because corporations are making profits and have access to cheap financing due to flooding of cash in the capital market. Traders can buy stocks when market retreats and take profit when market surges. Investors can buy at current level although it may appear expensive in comparison to the fire sale price one year ago. If investors can tolerate short term turbulence, equity stocks can provide appreciable return in the long run when investor confidence is restored.
IMF offers bleak assessment of stalled recovery
Plagued by uncertainty and fresh setbacks, the world economy has weakened further and will grow more slowly over the next year, the International Monetary Fund says in its latest forecast.
Global efforts to ease credit and increase the amount of money available for lending are helping, but appear to be yielding diminishing returns, as are fiscal stimulus policies, the IMF warned.
"Because uncertainty is high, confidence is low, and financial sectors are weak, the significant fiscal achievements have been accompanied by disappointing growth or recessions," it said.
Among other things, it says governments need to do more to relieve the burden of household debt that is constraining spending power and thus crippling demand.
While large corporations pay record low rates for credit, households and small companies struggle to obtain bank loans, it said.
As usual, the bright spots are developing economies that were less affected by the global financial crisis, where rising employment and strong demand will help support growth, the IMF said.
20% of Corporate America Cooks Their Books for Earnings Season: Report
It's earnings time again and Wall Street is chomping at the bit for more information about the health of Corporate America.
But a new report by finance professors at Emory and Duke University raises questions about the quality of these earnings.
In an anonymous survey of CFOs last year, the study found that at least 20% of companies are "managing" earnings and using aggressive accounting methods to legally alter the outcome of their earnings reports.
What may surprise you is that these accounting methods used by CFOs to "manage" the numbers are completely legal.
Of the 20% of companies that manipulated their earnings to hit a target, Graham says, a surprising 40% did so to the downside, not the upside.
Why would companies downplay their numbers? To pad and improve future quarters' earnings.
He says investors should not put too much faith in one individual earnings report and suggests looking at companies over the long term. Graham argues that cash flows are a better baromoter than earnings.
The CFOs surveyed in separate report by Graham said they expect earnings to increase 6% over the next year.
Marc Faber: Market Setting Up for 'Serious Setback'
Faber discounted the role of government intervention as a way to improve economic conditions.
Global markets have been weakening technically and are poised to head sharply downward, "Gloom, Boom & Doom Report" editor Marc Faber told CNBC on late Tuesday.
"We need less policies, not more policies," he said.
"I would love to see everywhere in the world, certainly in the Western world, government expenditures and government bureaucrats cut by minimum 50 percent," he added. "That would turn me very bullish."
Cramer: No Logic to the Selloff
"Five years ago today the market hit its all-time top. Here we are closing in on it again."
It seems that line of thinking caused many people to be sellers of Tuesday's market, Jim Cramer said on CNBC's "Mad Money." Cramer admitted that there are some similarities between then and now. Five years ago, the markets bore witness to the mortgage crisis coming to the fore and the burst of the housing bubble. Today, he noted the market faces the uncertainly in Washington surrounding the "fiscal cliff" and a sluggish U.S. economy.
To Cramer, it's "a little silly" that just because stocks were expensive at a certain level five years ago, they must be expensive at that same level today. What really matters, he said, is what stocks will be worth three months or three years from now.
So while the pundits continue to scare investors, Cramer said he plans on analyzing which stocks have the best prospects, so he can figure if they dropped to a level worth buying.
Why The Smart Money Is Underperforming the Market: WSJ’s Zuckerman
Hedge funds are having one of their worst performing years in over a decade. Bank of America Merrill Lynch reports that hedge funds are posting their smallest gains since 1997, and through the third quarter this year advanced just over 3% while the S&P 500 gained 13%.
The Wall Street Journal's Greg Zuckerman tells The Daily Ticker the underperformance is nothing new. Hedge funds and private equity funds have lagged the past few years but not to this extent, and both are now trying different strategies to reverse that trend, he says.
The problem, says Zuckerman, is that "hedge funds have grown too big and too bearish."
Assets have been pouring into hedge funds over the past few years from pension funds and other sinstitutional investors, and the funds are having a hard time putting all that money to work.
Contrary to popular belief hedge funds are not necessarily designed to make big, aggressive bets on investments.
"They're suppposed to be more cautious and underperform in a market up 15%," says Zuckerman, but not by so much. Hedge funds have been "a little too skeptical, a little too suspicious of this rally."
Private equity funds are also having problems this year. Cambridge Associates says the biggest buyout funds launched in 2006 and managing $3.5 billion or more have gained just 4%.
Zuckerman says private equity funds are stitting on close to one trillion dollars cash. That's not what investors had planned on, but Zuckerman says investors have been patient.
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