Tony Sagami, a former Merrill Lynch stockbroker with 30 years of market experience, says the average investor
is about to get cleaned out.
In his note for Mauldin Economics, he reproaches today’s traders for turning into “cheerleaders who think the Federal Reserve exists to help them make money, which is why Bullard’s criticism is so accurate.”
“Those trend-following knuckleheads on Wall Street don’t realize it (yet), but the stock market will fall without the Fed’s help, because corporate America is starting to really struggle,” predicts Sagami.
What evidence does he have?
Only 37% of firms have increased
their revenue estimates over the last six months - the smallest number
since the 2001 dot-com bust.
And just 49% of stocks have had their earnings-per-share estimates revised up, the least amount since 2012.
What
this all means is that Wall Street and its traders are aware that the stock market is going to drop like a stone unless there is more stimulus from the central bank.
“Wall Street continues to tell you and me to keep buying stocks, while behind the scenes they are becoming more bearish by the week,” he says.
Sagami is not alone in telling the air from the stock market bubble is coming out by itself. Peter Schiff sticks with the same opinion, predicting that the Fed will launch QE4.
Are we in a bear
market?
Rallies that can’t hold, low-volume rallies, and triple-digit drops hint we might have got one. Moreover, “when the media start to regularly comment about the bear market ... it’s too darn late,” he says.
Sagami has been cautioning traders that they should protect their portfolios since the Dow hit its high for the year to date of 18,321 in May. We have only seen a tip of the bear-market iceberg, he says.
