More Crash Commentary

Nicole Elliott from Mizuho made a special Thursday appearance on European Closing Bell and she is very bearish on G7 stock markets including the US. She thinks that 2006 is looking a lot like 1987. She noted that the problems of 1987 started with a backing up of bond yields. True enough that bond yields are moving higher. She also mentioned worries about the housing market then as now.

She said she hopes it will not be exactly like 1987 but she believes investors should prepare themselves for something similar. When asked why she is so bearish when so many people are so bullish (Simon Hobb's assessment of sentiment not mine) she said it just doesn't feel right and that she is not an equity analyst trying to sell something.

Nicole, as I did, made a little fun of the media for the "how close to an all-time high for the Dow" nonsense from a few days ago. Another catalyst for the call is the exchange rate. She is a dollar bear and because of the currency translations of the last few years she called investing in the US pointless.

Look, I have no idea if the market is going to crash later this year. Trying to predict a crash is beyond my skill set. But I do know that crashes come closer to bottoms than tops. I am more likely to add a little exposure into the panic than sell into it. This is more I have seen this movie before analysis. We should be more fearful of the market rolling over slowly, averaging an innocent 2% down for several months in a row.

It is too early for me to characterize the importance of this move down from 1325. I'm not saying it is unimportant I am saying I don't know. I am feeling lucky for the cash I raised in the last week in April and unlucky for not raising more.

I have decided that I will reduce a materials name, an industrial and a healthcare name (all domestic stocks) as a first move if the SPX does breach its 200 DMA, at around 1250 on the SPX (I'll worry about the exact number if we get close).