The 7 Biggest Mistakes Fund Investors Make

(MarketWatch) — There’s a difference between trying to do the right thing and actually getting it done. The biggest mistakes mutual-fund investors make fall right in the middle, where an investor trips over the fine line that separates good investing habits from bad.

In talking to financial experts and fund specialists, as well as reviewing industry statistics about ownership and asset flows, it’s clear that the investing public keeps trying to do the right thing, it just doesn’t always get the best results.

Here are the seven biggest mistakes fund investors make. If they describe the way you have been investing, it might be time to check your portfolio — and your mindset:

1. Chasing returns: Buying what’s been hot makes intuitive sense — you’re riding the express train — but all too often results in disappointment. Ideally, the idea is as simple as “buy low, sell high,” but investors who chase performance typically are late to whatever market sector or investment style is hot. As a result, they buy at high prices, and when the market turns and starts to favor something else, these investors then sell low.

2. Rearview-mirror investing: It’s hard to go forward when you are only looking backwards. This problem is related to performance-chasing. You can’t just buy funds that did reasonably well in the past; you need to invest in parts of the market that are likely to do well going forward. Too many investors know what a fund has done recently but have little idea of the fund’s prospects.

3. Overreliance on rankings and ratings: More than 90% of all new money into mutual funds go to issues that carry Morningstar’s four- and five-star rating. Yet the investment research firm is quick to note that its star system is more “descriptive” than “predictive.”

There is nothing wrong with buying only funds that do well according to stars, numbers or any system, but make sure the fund adds diversification and strategy to your portfolio, rather than bringing only a past that was good enough to earn a top grade,

4. Assuming you can buy and hold a fund forever: Funds change, markets change, people change; what’s appropriate to buy at one point in your life may not be right later. Yet too many investors are married to their funds, hanging on in sickness and health, for richer or poorer, rather than always considering whether they would still buy the fund today. If key buying factors change — everything from the manager, the asset class, costs and track record and ratings — you shouldn’t blindly stay put Read about bad mutual funds and the investors who love them..

5. Failing to understand what the fund does, how it invests or what it buys: When investors are surprised by a fund’s lagging performance, it’s often because they never clearly understood the fund’s objective.

Too many investors can’t explain what their funds do and why. They may know they own a large-cap growth fund or an index fund, and they’ll review the ratings and performance, but when it comes to the nuts and bolts, they don’t know where to start.

For example, a mutual fund is considered “diversified” once it has more than 16 stocks, but it can still be concentrated or focused in a certain market sector. Likewise, investors who buy funds that top the charts don’t necessarily know what those funds did to stand out from the pack.

6. Letting emotions rule: It’s hard to prove a system or stick to a discipline if you make changes on a whim or with every market hiccup. There’s a natural human tendency to let the most recent experiences color judgment; as a result, investors typically give too much significance to current events and expect that trend to continue. Wanting to cash in on those trends or protect against them, they’ll let fear or greed rule the day and invest with emotion rather than intellect.

7. Focus too much on a fund, and not enough on the portfolio: Finding good funds isn’t that hard; putting them together in an effective, low-maintenance, diversified portfolio is a lot more difficult. Too many investors have a collection of funds, rather than a strategic portfolio, where every fund has a role and every new addition is evaluated not just on its own merits, but on what it adds to the big picture.

Owning five or 10 mutual funds does not make an investor diversified if most of those issues reflect one or two asset classes. Investors need more than a “good” fund; they need funds that enhance their holdings, diversify risk, bring additional asset classes into play and help the portfolio achieve their goals over time.

Full Text of PM’s Budget 2011 Speech

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The Calm Before the Stock Market Storm

It was a relatively calm week as global stock markets for the most part flat-lined in the face of conflicting economic news and statements from the Federal Reserve.

The bulls and bears have largely been at a standoff since mid September, and while nobody can predict the future, I can tell you with some certainty that this stalemate will not continue.

In fact, the longer we remain in this sideways coiling process, the more powerful the breakout will eventually be, either up or down.

This coming week promises to add significant clarity to the future direction of the market and signal the end to the “calm before the stock market storm.”

Make no mistake, the storm is coming.

In the chart of the S&P 500 above we see a number of interesting items.

First off, notice the similarity of the patterns identified as #1 and #2. In July we can see the significant run up to the top circled in item #1, followed by a steep decline into late August, and it’s easy to notice the eerie similarity labeled item #2 with the run up in September to the top we’re currently in, followed by a dotted line indicating the next potential move down to the mid 1000 level or below on the index.

This move would be supported by RSI, labeled #3 and is currently overbought with this market condition confirmed by item #4, the Stochastic, also in overbought territory and looking much like its position in early August before the August decline that quickly dropped nearly 9% from the index’s value.

So it’s quite clear from a quick glance at just one chart that the next tradable move is most probably towards the down side.

The View from 35,000 Feet

The technical story is further confirmed by seasonality which points to October as the month most susceptible to steep declines and crashes while the fundamental picture is murkier.

And always present in today’s post crash world is the not so invisible hand of Dr. Bernanke and his colleagues in the equity and currency markets of the world.

Last week’s fundamental news was mixed with positive numbers coming from the Case/Shiller housing index showing a rise in home prices, a small improvement in the jobs outlook and improvements in the Chicago Purchasing Managers Index and the University of Michigan Consumer Sentiment Index.

On the negative side of the ledger we saw a conflicting drop in Consumer Confidence along with an ominous reading in the ISM report on Friday.

Just to take a closer look at the ISM report, it’s important to understand that it dropped to 54.4 from a previous reading of 56.3 and that readings above 50 indicated economic expansion. While seemingly not a huge decline, the internal components were significantly weaker with particular red lights flashing in the decline in new orders, a slowing of hiring and a significant rise in inventories, all of which precede a slowing economy and declining earnings.

Finally, and perhaps most importantly, the Federal Reserve has practically announced that they’re going to resume “quantitative easing” at the conclusion of their next meeting on November 3rd.

Chairman Bernanke, “Big Ben” as he is affectionately known in the blogosphere, telegraphed his intentions after their meeting on September 30th and this week William Dudley, the President of the New York Federal Reserve said, “Further action is likely to be warranted unless the economic outlook evolves in a way that makes me more confident that we will see better outcomes for both employment and inflation before too long.”

It seems safe to say now that the only questions are, “how much,” “how” and “will it work?” The consensus answers are $500 billion most likely distributed in smaller tranches rather than in the “shock and awe” fashion of last year.

Regarding “will it work?” the answer is “most likely not.”

A much bigger round of easing last year obviously didn’t work or they wouldn’t be starting off on another round now; it didn’t work in Japan and it didn’t work for FDR during The Great Depression. It’s quite likely that much of “QE2” is already priced into the market and that we would see a short term pop in asset values followed by more of the grinding market action we’ve seen all year.

What It All Means

In three words, “more pain ahead.”

We unfortunately have a long road ahead as a country and as investors and try as they might, the best the powers that be can hope to do is kick the can down the road, as the old saying goes.

Herbert Hoover, “the father” of the Great Depression learned this lesson and our current leaders should listen to his voice of experience: “Economic depression cannot be cured by legislative action or executive pronouncement. Economic wounds must be healed by the action of the cells of the economic body – the producers and consumers themselves.”

We will heal but it’s going to take some time and much more pain.

Over the last few weeks we’ve been in the “calm before the storm.” The storm is about to hit and will either take us to higher ground and safety or into a vortex of volatility and asset destruction. Wall Street Sector Selector remains in the “red flag” mode, expecting stormy weather and lower prices ahead.

The Week Ahead

It’s very likely that this week will be pivotal with large scale economic reports on the horizon and the official start of Q3 earnings season.

Gold: Heads You Win, Tails You Win

If someone came up to you and said that they were going to flip a coin and if heads came up you win and tails came up they lose, you would probably walk away and tell the person to get lost and go try to con someone else.

In terms of gold, though, we are increasingly beginning to hear people argue that gold will rise no matter what happens!

Today we read one article that quoted an analyst as saying "Either a swift economic recovery or further dismal economic performance should bring new buyers into the market." We realize that there are certainly some valid arguments for buying gold, but a comment like this is not one of them.

Now, we wouldn't necessarily go as far as to say that gold is in a bubble. After all, unlike a lot of recent asset bubbles where prices skyrocketed even as supply expanded, the supply of gold is relatively constrained. That being said, arguments presented as a win win regardless of the outcome are usually found closer to the peak of a move than the beginning.

Why The Market Will Keep Falling

Economic indicators have been on the decline for several weeks now. However, it took until this week for investors to flee from equities. To understand why the market took so long to respond to the souring data you have to understand that a Catalyst is usually required for stocks to begin moving in unison with reality. You also have to understand that a Catalyst is the fourth, but most important, of four keys key to successfully timing a move in the market (or individual stocks for that matter):

1. Understand the environment -- Observing what's happening in your neighborhood can help, but it isn't enough. You need a broad view of what's going on with business and economics, in the U.S. and worldwide. Several objective sources can be found on the Internet.

2. Understand when the government and/or Fed will intervene and if the intervention will help -- When the economy is in danger, the government and/or Fed will inevitably intervene to save the day. If you short the market and an intervention occurs the next day, you’re probably going to lose money.

In this case, my feeling has been that the government wouldn’t do much, because “stimulus” has become a dirty word with the public. With elections looming, nobody in Washington can afford to risk angering the electorate. Thus far, that has proven half-right. Unemployment benefits were on death’s door, but were eventually reinstated. That was a good way of pumping money into the economy without making too many people angry. In addition to this, the Fed has been making some minor moves of its own. This is also a savvy political move, because the public doesn’t generally associate the Fed with a political party.

The bottom line is that intervention remains possible. Keep in mind, almost any intervention will hurt the value of the dollar, but the government and Fed seem perfectly willing to sacrifice the dollar to keep GDP from falling (the definition of “recession”). Also keep in mind that a falling dollar almost always generates higher stock prices.

3. Understand if the market reflects reality -- Most of the time, this is pretty easy. If reality looks bleak and the market hasn’t dropped, something has to give. Either stimulus is on the way or the market is due to roll over. In this case, the government and Fed have both made some moves (as I discussed above), but I don’t think it’s enough. Based on the market’s reaction over the past couple of days, investors seem to agree with my view.

4. Understand the Catalyst -- The market doesn’t always respond to reality in real-time. In fact, experience has shown that it almost never does. Back in November of 1999, there were clear signs that the Internet bubble was bursting. Despite this, the market didn’t peak until March of 2000. If you shorted the market in November of 1999, you could have gone bankrupt -- a harsh reward for being right about what was coming. Similarly, in May of 2007, it was clear to me that the real estate bubble was coming to an end. However, the market churned higher until October, some 5-months later.

Knowing what’s going to happen next is great, but knowing what will make investors act on that reality is what will make you rich.

Most recently, I published a SeekingAlpha article entitled “Which Way Is the Market Going Next?”. In that article, I wrote that the economy was starting to turn south again. I also stated my opinion that the market would start reflecting this reality “very soon”. Over the next week or so, the NASDAQ slid from 2,242 to 2,160...but almost as quickly rebounded, shooting above 2,300. Only in the past couple of days has the market fallen back below 2,242.

Assuming we are now in the midst of a correction, my call took a month to be proven correct. The reason my timing so far off was a misinterpretation of the Catalyst -- the event(s) that would make investors believe (and more importantly, act on) my interpretation of reality. In this case, I felt that investors would simply see the writing on the wall and start selling stocks, despite what I felt was going to be a relatively healthy Q2 earnings season.

That was my mistake. As good earnings rolled in, investors ignored signs of a bleaker future in favor of reports of a brighter past. Then, as earnings season wound down, investors refocused on the economy, but believed that the Fed would come to the rescue at this week’s FOMC meeting.

It was a valid argument, but as it turns out, the Fed's stated plan-of-action proved disappointing. Worse yet, with elections coming in November, the Fed is likely to honor its tradition of maintaining its status quo in the months leading to an election (for fear of being seen as politically biased).

With no more positive Catalysts upon which to cling, investors are left with no choice but to face reality. Thus, the Catalyst for a market decline was born.

In the coming weeks, I believe we’ll see more signs of economic degradation. With earnings season winding down and the Fed meeting behind us, positive Catalysts appear to be exhausted for now. Barring a surprise government or Fed intervention (unless, barring a full fledged crisis), the near-term Catalysts are likely to be negative, lighting the way to further stock market declines.

Article from Seeking Alpha

Why The Market Will Keep Falling

Economic indicators have been on the decline for several weeks now. However, it took until this week for investors to flee from equities. To understand why the market took so long to respond to the souring data you have to understand that a Catalyst is usually required for stocks to begin moving in unison with reality. You also have to understand that a Catalyst is the fourth, but most important, of four keys key to successfully timing a move in the market (or individual stocks for that matter):

1. Understand the environment -- Observing what's happening in your neighborhood can help, but it isn't enough. You need a broad view of what's going on with business and economics, in the U.S. and worldwide. Several objective sources can be found on the Internet.

2. Understand when the government and/or Fed will intervene and if the intervention will help -- When the economy is in danger, the government and/or Fed will inevitably intervene to save the day. If you short the market and an intervention occurs the next day, you’re probably going to lose money.

In this case, my feeling has been that the government wouldn’t do much, because “stimulus” has become a dirty word with the public. With elections looming, nobody in Washington can afford to risk angering the electorate. Thus far, that has proven half-right. Unemployment benefits were on death’s door, but were eventually reinstated. That was a good way of pumping money into the economy without making too many people angry. In addition to this, the Fed has been making some minor moves of its own. This is also a savvy political move, because the public doesn’t generally associate the Fed with a political party.

The bottom line is that intervention remains possible. Keep in mind, almost any intervention will hurt the value of the dollar, but the government and Fed seem perfectly willing to sacrifice the dollar to keep GDP from falling (the definition of “recession”). Also keep in mind that a falling dollar almost always generates higher stock prices.

3. Understand if the market reflects reality -- Most of the time, this is pretty easy. If reality looks bleak and the market hasn’t dropped, something has to give. Either stimulus is on the way or the market is due to roll over. In this case, the government and Fed have both made some moves (as I discussed above), but I don’t think it’s enough. Based on the market’s reaction over the past couple of days, investors seem to agree with my view.

4. Understand the Catalyst -- The market doesn’t always respond to reality in real-time. In fact, experience has shown that it almost never does. Back in November of 1999, there were clear signs that the Internet bubble was bursting. Despite this, the market didn’t peak until March of 2000. If you shorted the market in November of 1999, you could have gone bankrupt -- a harsh reward for being right about what was coming. Similarly, in May of 2007, it was clear to me that the real estate bubble was coming to an end. However, the market churned higher until October, some 5-months later.

Knowing what’s going to happen next is great, but knowing what will make investors act on that reality is what will make you rich.

Most recently, I published a SeekingAlpha article entitled “Which Way Is the Market Going Next?”. In that article, I wrote that the economy was starting to turn south again. I also stated my opinion that the market would start reflecting this reality “very soon”. Over the next week or so, the NASDAQ slid from 2,242 to 2,160...but almost as quickly rebounded, shooting above 2,300. Only in the past couple of days has the market fallen back below 2,242.

Assuming we are now in the midst of a correction, my call took a month to be proven correct. The reason my timing so far off was a misinterpretation of the Catalyst -- the event(s) that would make investors believe (and more importantly, act on) my interpretation of reality. In this case, I felt that investors would simply see the writing on the wall and start selling stocks, despite what I felt was going to be a relatively healthy Q2 earnings season.

That was my mistake. As good earnings rolled in, investors ignored signs of a bleaker future in favor of reports of a brighter past. Then, as earnings season wound down, investors refocused on the economy, but believed that the Fed would come to the rescue at this week’s FOMC meeting.

It was a valid argument, but as it turns out, the Fed's stated plan-of-action proved disappointing. Worse yet, with elections coming in November, the Fed is likely to honor its tradition of maintaining its status quo in the months leading to an election (for fear of being seen as politically biased).

With no more positive Catalysts upon which to cling, investors are left with no choice but to face reality. Thus, the Catalyst for a market decline was born.

In the coming weeks, I believe we’ll see more signs of economic degradation. With earnings season winding down and the Fed meeting behind us, positive Catalysts appear to be exhausted for now. Barring a surprise government or Fed intervention (unless, barring a full fledged crisis), the near-term Catalysts are likely to be negative, lighting the way to further stock market declines.

Article from Seeking Alpha

An Analysis Of The Death Cross Sell Signal

An Analysis of the Death Cross Sell Signal

Moving averages are used by many traders to identify trends as they smooth out price action and act as key support on the way up, and resistance on the way down. In fact, it is one of the most widely used technical indicators and extremely popular among high frequency traders because it is so clear cut and easy to program. It allows the trader to ride a trend higher and to cut losses short.

The death cross is a popular signal that when used properly can cut massive losses short. The death cross is also popular because many institutional investors use the 50 day moving average as a medium term average and the 200 day as the long term moving average. Basically, the crossover method signals a sell signal when the shorter term moving average crosses the longer term moving average to the downside. A buy signal is identified when the short term moving average crosses the long term average on the upside.

Crossover methods are easy to program into a computer. However, I must warn that one must use additional clues to create a sell signal. There are frequent whipsaws and failures when you use the crossover method in isolation.

Chart reading is an art that requires discipline, experience and study. Crossover methods used exclusively, such as by a computer program, will not produce the same results of an experienced technician who looks for other pieces of evidence to confirm the bearish crossover.

Similarly, back testing the results of the death cross using a computer program will not produce optimal results, since technicians look for additional signs of the breakdown than just the cross. I was recently interviewed by the Toronto Globe and Mail on this topic and explained that one must be aware of this crossover and its implications.

Some believe this signal is nonsense and show back-tested data with computer models. But they do not show the crossovers used in conjunction with other technical signals.

If the crossover signal is confirmed with a head and shoulders breakdown, a cross into new lows, and poor price volume action (which is occurring now), I will patiently wait on the sidelines. I will look for prudent short points when I see a price reversal and as the price comes up to certain resistance. If all these signs are coming together the probability of a whipsaw is significantly reduced.

It is also important to note that a death cross is further confirmed if the 200 day begins sloping downwards after the break. This will act as resistance on the way down.

A look at the death cross of the Dow in January of 2008 showed many of the signs of a market top and trend change. The 200 day which acted as previous support was violated on high volume and was followed by three failed railies at the 50 day moving average before crossing over. If not followed investors would have lost more than 60% of their portfolios.

Now is not the time to look for bargains but to protect your portfolio by selling on any bear rallies. I believe that this rally will be shortly coming to an end and we will continue to trend lower in equities. Use these rallies to prepare for shorting opportunities.

Top Ten Reasons to Be Bearish

This list tells you why I believe we are in the worst bear market of our collective lifetime.

10. Poor Outlook for Small Businesses – Small businesses make up more than 50% of non-farm GDP, employ about half of the nation’s private sector workforce, and create most of the nation’s new jobs according to the Small Business Administration. For the month of May, the National Federation of Independent Business reported that small business owners had a more negative outlook on job creation, capital expenditure plans, and future sales expectations. Considering that small business owners have more tenuous access to credit and are uncertain about cash outlays for healthcare and unemployment benefits, many are putting growth plans “on hold”. If 50% of GDP and employment remains “on hold”, it points to the strong possibility of a double dip recession and, in turn, another decline in the S&P 500.

9. Cash Outflows Are Trending Poorly – ICI reported that for the week ended June 16, domestic equity mutual funds saw $1.8 billion in outflows for the seventh sequential weekly outflow. Despite net activity of $5.2 billion for 2010 thus far, the first seventeen weeks of the year were comprised of $40.6 billion in inflows while the last seven weeks represented $35.4 billion in outflows. Should this trend continue, it will put managers in an awkward position of having to sell “winners” to meet redemptions due to the low levels of cash on hand. If both of these trends continue, one would have to believe it will have a negative impact on the S&P 500.

8. Tax Cut Expirations – Art Laffer, apparently not one for mincing words, wrote an excellent opinion piece in a recent The Wall Street Journal called, Tax Cuts and the 2011 Economic Collapse. While his title gets at the point rather well, briefly, in summary, Mr. Laffer made the very strong case, in my opinion, for the idea that income and production will be inflated above where it would be otherwise in 2010 since in-the-know individuals and businesses are shifting income, when possible, to 2010 in order to avoid the tax hikes that are coming in 2011. Not only did this happen in 1993 from 1992, but he believes “…this shift in income and demand is a major reason that the economy in 2010 has appeared to be as strong as it has. When we pass the tax boundary of Jan. 1, 2011, [his] best guess is that the train goes off the tracks and we get our worst case nightmare of a severe “double dip” recession.”

7. Deflation – In the most macro-terms possible, and at the risk of being repetitive, until the asset class at the eye of the financial storm – residential housing – heals via stabilized pricing, we are living in a world of deflation. This is reinforced by record low mortgage rates. In more micro-terms, over the last 12 months, the core rate of inflation has risen only 0.9% or well below the 2.0% average annual increase over the past 10 years. In addition, returning to small business owners, 28% reported making price reductions in May, an increase over April, while this price cutting contributed to a high percentage of such owners reporting declining sales. Lastly, the Fed’s extraordinary liquidity efforts of the last two years have led to stagnant money rather than monetary expansion. Should this transform into a true “liquidity trap”, stagflation is the best case scenario but outright deflation is more likely.

6. High Unemployment – 15 million Americans are out of work. Nearly half of those people lost their jobs after December 2007. Private sector hiring appears to be at a standstill with only 41,000 new jobs created in May. 46% of the unemployed have been out of work for more than 6 months or the highest percentage since this record has been kept back in 1946. The real unemployment rate, counting those who have simply stopped looking for a job, is nearly 17%. All in all, a rather bleak picture on the employment situation here in the U.S. and one that will lead consumers to remain on the spending sidelines and especially for houses.

5. Commercial Real Estate “Crash” – Various sources estimate that between $1.3 and $3.5 trillion in commercial loans is coming due in the next 5 years with more of it weighted toward 2012. This could be an ugly event. This is especially true if banks are unwilling or unable to offer new financing to the borrowers since commercial real estate owners will then be put in the awkward position of having to pay for multi-million dollar commercial real estate holdings in cash. While some will be fortunate enough to do so, there are others who will not and this will force mainly small and mid-sized banks, and insurance companies, to write down bad loans and determine what to do with portfolios of commercial real estate in a depressed market. This situation is so grave that chairperson of the Congressional Oversight panel, Elizabeth Warren, said that half of all commercial real estate loans will be underwater by the end of 2010 and the bulk of these loans are concentrated in small- and mid-sized banks. She even went so far as to say that this will devastate small-business lending and create “a downward spiral of economic contraction.”

4. Housing Double Dip – After a year of respite for the U.S. housing market due to the government’s tax credits and MBS purchases, residential housing is set to take another deep dip down. May’s non-government “owned” housing market activity was awful. Housing starts dropped by 10%, permits fell by almost 6%, mortgage applications were down, the homebuilders’ sentiment index dropped, existing home sales fell by 2.2% while new-home sales took a 33% nosedive. However, it is the combination of the S&P/Case-Shiller Index and annual housing starts that demonstrate that the housing market’s direction is down.

While this Tuesday’s CSI release may be to the positive as may be both July and August, the chart at top (click to enlarge) shows that there is a very real chance that pricing could level off where it had been in the late 1990s while housing starts are in unchartered territory having broken multi-decade support of about 1 million starts annually. It is difficult to see how the gravity of either chart can be warded off in the next 5 to 10 years, and thus to understand how the housing market can move in any direction other than down.

3. Financial Institutions Are Tied to the Housing Market – Putting aside the potential implications of the bank-reform bill and any links between U.S. banks and both European banks and sovereign debt, financial institutions are likely to have a tough go at it again. I spoke to a banking analyst yesterday who told me that if the decline in housing is accompanied by a worsening unemployment picture “it will really flow through” to U.S. banks and insurance companies. This “flow through” will show up in two places: (1) security portfolios, and, (2) loan portfolios. Remember the “toxic assets” of 2008? They still exist to the degree that they were not sold off or written down. If the upcoming decline in housing is aggravated by unemployment, it is likely to spur another wave of delinquencies and foreclosures.

This will hit the value of the security portfolios because much of the paper will become “toxic” again due to the non-performing loans layered in the various, and sometimes repackaged, tranches of debt. However, it will also hit the loan portfolios of banks, and this analyst thought this was the real danger, because banks will have to write off a new wave of bad loans and figure out to unload houses in a truly distressed housing market. All of this is why I continue to believe that until the asset class at the eye of the financial crisis heals – housing – we can be assured that the crisis itself is not over.

2. The World’s Unsustainable Borrowing Binge of the Last 30 Years – While not nearly as powerful as Mr. Laffer’s title, it does speak for itself. The private sector, and financial institutions in particular, borrowed in what proved to be an unsustainable manner between 1980 and 2007. “Unsustainable” because active borrowing as measured by the Federal Reserve collapsed in 2009 to -$611 billion from its annual peak of $4.6 trillion in 2007. That is a huge, almost incomprehensible decline in borrowing to have occurred in two years. The U.S. government has attempted to shoulder some of that load by borrowing about $2.9 trillion in the last two years, but it is a nearly impossible task. Should it prove to be more than the U.S.’s balance sheet can handle, it will result in foreign creditors demanding a higher rate of return on Treasurys as is happening in Greece today. This will devastate banks because their fixed-rate assets will be underwater, but more frighteningly, the U.S. dollar will become severely devalued if not collapsed.

1. The Ugliest Chart of All Time – Unless there is an act of God between now and 4 pm EDT this coming Wednesday, the chart of the S&P 500 will be forever altered for the worse. This chart is, of course, the basis for all of my work, or what I have called the Twin Peaks, or the S&P 500’s severe double top with a technical target that is far, far below where the index is today.

And there you have it, the Top Ten Reasons To Be Bearish and why I believe we are in the worst bear market of our collective lifetime.

Article from Seeking Alpha.