Tags: Gayed | Dow | Plunge | tomasulo

Investment Adviser Michael Gayed to Moneynews: Dow Plunge to 13,000 More Likely Than People Think

Thursday, 07 Mar 2013 04:52 PM

By Glenn J. Kalinoski and David Nelson

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Michael Gayed, chief strategist for investment adviser Pension Partners, is looking for a stock market pullback even as the Dow Jones Industrial Average climbs to new highs each day.

“I’ve been saying that Dow 13,000 is actually probably much more likely than people think as a retest before ultimately higher highs,” Gayed told Newsmax TV in an exclusive interview.

The Dow soared to a record Thursday for a third straight session. The blue-chip index rose 33.25 points, or 0.2 percent, to close at 14,329.49.

“The risk is not that I’m wrong. The risk is that I’m right. It’s not that the upside continues. It’s that the downside happens because negative compounding is far more damaging than missing an upside move.”

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Gayed, who said he’s been bearish since Jan. 25, discussed “very significant disconnects” between the “narrative of excitement that equities are writing for everybody” and what’s happening within the marketplace.

Editor’s Note: Put the World’s Top Financial Minds to Work for You

He characterized the recent rally has having been led by dividend, low-beta sectors including utilities, consumer staples and healthcare.

“Now the market follows, it does not lead,” Gayed said. “Sectors lead the market. The fact that you’re seeing that kind of leadership in the face of new Dow all-time highs to me is a big, big warning sign. These disconnects, historically, when they get resolved, they tend to get resolved very violently. Price action right now does not confirm bullishness.”

Jeff Tomasulo, managing partner at Belpointe Alternative Investments, also expressed concern to Newsmax TV about the “massive liquidity” that is being pumped into global markets.

“That is key right now,” he said. “So when you’re talking about models, correlations, disconnects, we have no idea what this kind of liquidity that’s getting pumped into the market is doing to these correlations. So when Michael talks about price action and when he’s talking about these correlations, you have to question it.”

Tomasulo went on to characterize the current environment as the most heated bull market in history.

“Hedge funds, pension funds are missing out,” Tomasulo said. “And this is what’s scary about how much higher this market can go and Michael’s right. We could probably get a correction, three or four percent.”

Gayed went further in his prediction for the market.

“The risk is not three to four percent,” he said. “The risk is 10 and up.”

Editor’s Note: Put the World’s Top Financial Minds to Work for You

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