Market Takes a Breather From Recent Relentless Rally

We're not off to a very good start this morning, as equity markets are down on the heels of some disappointing manufacturing news out of New York (seriously, why is anyone surprised that manufacturing is still shrinking?)  Also, international purchases of US assets slowed in April as our trade partners trimmed their holdings of US Treasuries.  Total net purchases of long-term equities, notes, and bond rose a net $11.2 billion, compared with $55.4 billion in March.  We rely on our friends in Asia to finance our massively exploding deficits so they need to be picking up the pace instead of pulling back.  If you include short-term securities, foreigners were actually net sellers to the tune of $53.2 billion, compared with net buyers of $25 billion the previous month.  Not the kind of help our nation needs right now.

The WSJ has an article today that poses the question of whether the current powerful stock market rally is a cyclical or secular bull market rally.  This seems to be the current debate among investors and regular readers should know where I stand on this issue.  In general I roll my eyes when commentators come on CNBC to pump the market and talk about how we're clearly in a new bull market.  I still maintain that if you're going to be on CNBC spouting your opinion, last year's returns for whatever fund you manage need to be stamped on your forehead so I can decide whether I care about your opinion about the market.  Because if you missed the top, you have no business commenting on the bottom.  FT's Alphaville posts a few interesting market datapoints courtesy of the chief investment strategist at Diapason Securities.  He picks a few examples of how markets behaved in the past such as the Dow in 1929 which fell 48%, rallied 48%, then fell 78% and Nasdaq 2000 which fell 40%, rallied 40%, then fell 81% and offers examples of a few of more recent market movement such as the Shanghai Comp '08 which fell 73%, then rallied 70% and the NDX '08 which fell 50% then rallied 48% with the future direction still up in the air.  Since the debate rages on, I'll let you draw your own conclusions.