Tags: stock | market | Doll | Kotok

Stock Market Pros Wary About Too Much of a Good Thing

Wednesday, 13 Nov 2013 07:55 AM

By John Morgan

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A growing body of market data warn the soaring U.S. stock market may not have much further to rise, according to Barron's.

In addition, a couple of normally bullish analysts, the high-profile Bob Doll of Nuveen Asset Management and David Kotok of Cumberland Associates, are also sounding a note of caution.

Barron's noted a Wall Street Journal report that the $51 billion value of initial public offerings (IPOs) launched so far in 2013 is at its highest since 2000, when bubbles in both tech stocks and IPOs popped. Follow-on stock offerings from existing companies this year are even higher, at $155 billion.

Editor’s Note:
5 Reasons Stocks Will Collapse . . .

Barron's also cited a report from the Street Authority that the aggregate value of the largest 5,000 U.S. companies, as measured by the Wilshire 5000, is trading at about a 10 percent premium to the gross national product, an extended level that has been accompanied by stock market downturns in the past.

"The value of this market, while a bit lofty, hasn't hit bubble levels by most people's definitions," Barron's cautioned. "That doesn't mean that it's not time to heed some of the aforementioned warning signs and take some profits."

Doll, Nuveen's chief equity strategist, said in his weekly commentary, "Recent new record highs for U.S. equities (S&P 500) have been accompanied by the weakest buying pressure in more than a year."

The stock environment reminds Doll of two previous periods when stocks became weaker. "This lack of buying pressure is similar to May 2011 and September 2012, and suggests the rally could give way to market consolidation."

At Cumberland Advisors, Kotok, chairman and chief investment officer, concluded his own weekly commentary thusly: "Cumberland's stock market accounts remain fully invested — somewhat nervously, because part of the driving force for equities investment is the calculation of value based upon very low interest rates.

"We know low interest rates cannot be sustained forever. We know that the G-4 central banks collectively have tripled the size of their balance sheets since the financial crisis broke out after Lehman-AIG. We know that something must give," Kotok said.

In a piece titled "Technical Hand Wringing Du Jour," the FT Alphaville blog concluded from its informal pulse taking of experts that "signs of euphoria abound and a 5 to 10 percent correction seems plausible."

FT Alphaville cited reports that stock buybacks from non-financial companies have vanished during 2013 — not exactly a sign of confidence — while speculative investors have taken lopsided, and thus risky, long positions in equities.

Editor’s Note: 5 Reasons Stocks Will Collapse . . .

Related Stories:

BlackRock's CEO Fink: Stock Market Poised to Plunge 15 Percent

MarketWatch's Hulbert: Buy Blue Chips to Protect Against Stock Market Drop

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