This blog post originally appeared on RealMoney Silver on April 18 at 7:25 a.m. EDT.Over the weekend, there were two additional negative data points. First, China raised bank reserve requirements for the fourth time in order to slow down inflation. Reserve ratios will rise a half point on April 21, with the People's Bank of China pushing the requirement to a record 20.5% for the biggest lenders. Second, Goldman Sachs ( GS) Economist Jan Hatzius cut first-quarter 2011 GDP forecasts from 2.5% to 1.75%. (The firm's projection was 3.5% only a month or so ago!) A week ago, I wrote a column, " Apocalypse Soon," which outlined, in a comprehensive way, the ingredients for a market fall. On Thursday in The Edge (my exclusive RealMoney Silver trading diary), I suggested in "Apocalypse Soon? Apocalypse Now!" (reprinted below) that a market correction was looming ever closer.
In Monday morning's opening missive, "Apocalypse Soon," I set the stage for a more cautious market view. That view was based on a number of factors:Both columns "bear" re-reading this morning. Indeed, since their writing, the market conditions have deteriorated further:
I believe that column "bears" rereading, as it might be one of the times that I will be proven (and have the timing) correct -- and for the right reasons! Apocalypse soon? Maybe Apocalypse now.
- higher oil and input prices;
- a debased U.S. currency, lingering budget concerns and political partisanship, which could jeopardize a budgetary compromise (and resolution);
- screwflation of the middle class and its inevitable impact on economic growth and corporate profits;
- the specter of structural unemployment;
- the absence of a recovery in home prices;
- the fiscal and monetary "stabilizers" are soon to be taken off;
- vulnerability to consensus 2011 growth projections, corporate margins and profitability;
- the euro sovereign debt crisis, thought to be contained, has continued to spread;
- a relatively anemic recovery exposes the economic cycle to the vulnerability of more black swans (and tail risk), which are occurring with greater regularity; and
- investor sentiment has moved to a lopsidedly bullish extreme.
- Consumer nondurable issues have outperformed, a classical sign of a more defensive market.
- Former market-leading stocks -- namely, Google (GOOG) and Apple (AAPL) -- have begun to underperform.
- First-quarter earnings reports have been disappointing and, when combined with No. 4 below, render the $95-a-share consensus S&P forecasts for the year more problematic.
- The price of energy products and other input prices show little signs of moderating.