Meet the Bears
Nouriel Roubini (RGE), Bob Janjuah (RBS), Dylan Grice and Albert Edwards (Societe Generale), David Rosenberg (Gluskin Sheff), etc. The names are familiar to you already and so are their opinions. These are the bears and for the most part, they build their convictions on fundamental analysis.
The two camps are divided and pitted against each other with a few exceptions. Richard Russell who is widely recognized as the most exceptional student of Dow Theory is now bearish citing technical breakdowns and the fear of deflation. Robert Prechter, the recognized authority in Elliott Wave analysis is also bearish, expecting the continuation of the secular bear market to take prices back to March 2009 levels. And finally, Mark Steele (BMO Quant/Technical Research) who told clients to “Go to Cash – In Plain English“.
Among the reasons for issuing a “Get out!” message, Russell pointed to the break down in leadership stocks like Google (GOOG). But if I may be so bold as to quibble with the oracle of the Dow a bit, I would like to point out that the while Google has been showing weak relative strength for some time, other leadership stocks – including Apple (AAPL) which he specifically pointed out – are doing just fine. In fact, the advance decline breadth (see above link) demonstrates that the majority of stocks are in fact much stronger than the superficial numbers on the indexes.
I do not have a monopoly on truth nor do I pretend to know what will happen. I’m simply pointing out that for the most part, the bulls and the bears are split along how they approach the market. And I don’t disagree that if you look at the fundamentals, things look absolutely horrendous right now.
Consuelo Mack interviewed David Rosenberg, Gluskin Sheff’s chief economist and strategist, recently. Back in February 2009, Rosenberg predicted the S&P 500 could fall to 666 (link), which it did. However, he remained much too bearish on the stock market, which eventually doubled from its nadir in a mere 2 1/2 years. 
David Rosenberg Says the Market is Overpriced
October 10, 2009Joe Weisenthal has written about David Rosenberg’s recent special report claiming the market has discounted 5 years of expansion in the current price of equities. From Rosenberg’s report: “On an operating (“scrubbed”) basis, the trailing P/E multiple on the S&P 500 has expanded a massive 10 points from the March lows, to stand at 27.6x. [...]