Things that make me go Hmmmm Part 2

A short hiatus last week but back with today’s Soundbites.  On May 9th, I wrote and provided some content that I felt was timely due to the market volatility at the time.  Since then, that volatility and declines have continued, however, there are few more things that have surfaced that are making me go Hmmmm once again. 

·         Year to date, the Dow is down 14.5%, S&P 500 19%, Nasdaq 28% and the TSX 5%

·         The S&P has closed down for the 7th consecutive week, this is longest weekly down streak since 2001 which fell 8 straight weeks 

·         Walmart and Target, two stocks that are a proxy on the consumer, reported and missed their earnings expectations.  They have faced supply issues, rising fuel costs and higher inventories but it begs the question, is the consumer out of cash or simply tightening their belts?

·         Institutional cash levels are at their highest levels since 9/11

·         The latest data from the Toronto Regional Real Estate Board revealed a drop in both the number of sales that took place in April down 41.2% year-over-year and the selling price.  905 regions in particular saw a significant drop, with average prices falling more than $200,000 from February’s numbers

Do I continue to believe the markets are telling us something?  I absolutely do, but despite the bearish or negative data, I also begin to see the opportunities.  If you were interested in purchasing a home, a car or a new sweater, at what price reduction would you be interested in finally making that purchase; would it be 10%, 15% or 20%?  Although equity markets are intangible items, they can experience price reductions of 10%-20% and in many cases more.  Suffice to say, at those levels, equities get my attention.