Mish's Global Economic Trend Analysis

Rajoy Further Implicated in Scandal; Support Drops to 23.9% in Record Plunge

Posted: 03 Feb 2013 06:24 PM PST

Prime minister Mariano Rajoy is now personally implicated in the slush fund scandal in Spain. Via Google translate, please consider Rajoy and his family were paid with money from Gürtel travel

The front page of Monday's newspaper "La Gaceta" promises new revelations about political scandals that are playing close to the popular government of Mariano Rajoy.

The fore mentioned entitled 'A Rajoy also paid travel, "about a picture of the back of the highest representative of the Spanish.

"His wife, his son and personal assistant flew business class to Las Palmas with money Gürtel", added the subtitle, attaching notes as evidence under seal 'exclusive'.

That should not be a surprise, but what choices do voters have?

Please consider this choppy translation from El Pais: crisis and corruption lead to PP to lower expectations

At this time, there is a ruling party with almost hegemonic majority, allowing it to act with little parliamentary scrutiny and yet have an estimate of the single vote of 23.9%, the lowest of democracy, only one year after having swept the polls. In a month and has lost six points from more than 20 points overall, without stating whether touched and thoroughly. And in theory are almost three years to allow citizens to speak at the polls. Your vote expectancy is now almost three points below the result of the AP of Manuel Fraga , 1982, when the PSOE of Felipe González swept him with 202 deputies.

Political Party Descriptions

From Wikipedia, here is a description of the top political parties in Spain.

Who do voters trust?

No one. Worse yet, Rajoy and the EU have threatened journalists that do not toe the party line. It's 1984 in spades. For details, please see Big Brother in Action: EU Wants Power to Sack Journalists; Prime Minister Rajoy Threatens Newspapers Following Corruption Articles

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

Extreme Sentiment: Barron's Cover "Get Ready for Record Dow - We Told You So"; Top Call

Posted: 03 Feb 2013 10:44 AM PST

Looking for extreme sentiment?
Look no further than the cover of Barron's magazine.

The cover speaks for itself, but check out some of the commentary in New Highs in Sight

The party is far from over. The early-year rally that on Friday took the Dow Jones Industrial Average to within 1% of its record high, set in 2007, could have a lot further to run. For starters, stocks aren't expensive. The Standard & Poor's 500 index is valued at about 14 times estimated 2013 profits and the Dow fetches less than 13 times projected 2013 earnings. At the market peak in 2007, the Dow traded for 16 times forward earnings. Given ultralow interest rates, the market multiple has room to expand even if earnings growth remains modest.

There's a huge amount of money that could shift into stocks because individuals until recently have favored bonds over equities, based on mutual-fund flow data. "If there is a great rotation going on from bonds to stocks, we may be only in the top of the first inning," says Jason Trennert, chief investment strategist at Strategas Research Partners in New York. Trennert cites the TINA -- or "there is no alternative" -- factor, as yield-starved investors move into stocks.

First Inning?

For starters, are the forward earnings estimates any better now than they were in 2007?

Second, let me point out that money does not flow from stocks to bonds or vice versa. For every buyer of stocks there is a seller, so the statement on rotation from bonds to stocks is point blank absurd. There can be a repricing of bonds, a repricing of stocks, a repricing of both, or a repricing of neither, but there is no flow.

Third let me ask "Does it get any more extreme than someone calling this the first inning after stocks have had more than a 100% rally in a few years?

Nonetheless, sentiment alone cannot time a top. Perhaps the DOW or the S&P do make new record highs. Regardless, this Barron's cover reminds me of a post I did back in 2005.

Home $weet Home

Back on June 7th, 2005 I put in a top call with help from Time Magazine. That top call was based on this cover.

Time Magazine went gaga over real estate on the June 12th issue, right at the very peak of the bubble. Congratulations must go out to Time Magazine for that fine achievement.

On March 26, 2005, in It's a Totally New Paradigm I posted this chart

Then when the cover of Time hit, I moved the arrow to the top. Check out the comments at the time.

Ron Shuffield, president of Esslinger-Wooten-Maxwell Realtors says that "South Florida is working off of a totally new economic model than any of us have ever experienced in the past." He predicts that a limited supply of land coupled with demand from baby boomers and foreigners will prolong the boom indefinitely.

"I just don't think we have what it takes to prick the bubble," said Diane C. Swonk, chief economist at Mesirow Financial in Chicago, who was an optimist during the 90's. "I don't think prices are going to fall, and I don't think they're even going to be flat."

"I look at this as a short-term investment," said Mr. Farquharson, 36, who works for a venture capital firm, "and plan to unload it as soon as things look dangerous."

Top Call

Supposedly we are only in "the first inning" of a rally. Hmm. Are stocks supposed to rise 900% more? This may not be "the top" but it's close enough for me. I'm calling it.

Mike Shedlock / Mish
http://globaleconomicanalysis.blogspot.com/

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Mish's Global Economic Trend Analysis

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