June 9, 2010 Market Update
Click here to see the Empire Performance Update to the end of May.
May was a particularly difficult month for the markets generally. And in the early part of June we have been reading a few stories about how this is a buying opportunity. Some of the reporters and also the analysts being interviewed are talking that way as well BNN regularly has guests on the show who speak of this great buying opportunity.
However, I would suggest that the month of May was only the beginning. These markets will likely continue to unravel from here as fundamentally nothing has changed.
The Europeans still have a prohibitive level of debt. America has borrowed substantial sums of money as well. Unemployment remains at stubbornly high levels. The broadest index in the US is still overvalued going by historical measures.
Personal debt is still prohibitively high, here in Canada as well as in the US. Money supply is contracting. House prices in the US are still dropping and the number of home sales in Calgary and Vancouver were down substantially in May with a 17% YOY drop in sales in Calgary and 10% drop in Vancouver.
When we look at the actual indexes, we see that the TSX as well as the S&P in the US are both trading below their 200 day moving averages. The 50 and 100 day moving average trend line is down and the 200 day will roll over soon. From a technical perspective these are all very strong signs that we are in a bear market. Again.
So, stay out of the way of this market, continue to pay down debt as fast as possible, and remain as liquid as possible.