Even though 2014 has started off with a whimper for the markets, Jonathan Golub, Chief US Market Strategist at RBC Capital Markets, believes that stocks could hit record highs this year.

“If we’re looking at an economy that’s probably going to grow at 2.5% this year – which is a very reasonable number,” says Golub, “that should be enough to drive something between 7% and 8% or more of earnings growth.”

“If you look at valuations, [stocks] still look very cheap relative to bond,” says Golub. “You add those two together and I don’t see why you wouldn’t have a double-digit return this year.” Golub says history shows stocks can still have a good year after a great year. In 2013, the S&P 500 had return of 29%.

“If you look at the 10 best years over the last 75, the average return has been about 14% following really great years,” says Golub.

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The article above represents a prevailing view on Wall Street today. With bearish sentiment at an all time low, NO ONE sees any potential downside. If you are to listen to the main stream financial propaganda machine and most of the large banks, the stock market is going to the moon and beyond.

Yet, for any reasonable investor this time period should represent a perfect opportunity to pause and reflect on where we really are. Let’s think about this for a second….

Is our economic recovery real?

NO. The main street is not feeling any type of an economic recovery. With poverty rates being at 50 year highs and with “real unemployment” pushing over 15%, only financial entities have been able to benefit from any type of an economic recovery. Once again, the perceived economic recovery has been driven by massive infusion of credit into the financial system through QE, low interest rates and speculation.

Is the stock market overpriced?

Absolutely. While everyone will have their own definition of “overvalued”, as a value investor, I cannot find anything to invest in. Everything is overvalued and the prices I see today are reminiscent of 2000 and 2007 time frames. However, if you enjoy buying $1 bills for $5, go for it.

Is there extreme Bullish sentiment?

Yes. Most sentiment indicators show that most bears have been killed. Some of the bullish sentiment readings are at an all time highs. Higher than 1987, 2000 and 2007.

What does history teaches us about such times?

Well, the history teaches us that such times are dangerous. Listen, there is no doubt that the market is overpriced and highly distorted by credit and speculation. This cannot continue for an indefinite period of time. No matter what, the markets always readjust themselves. As my mathematical work clearly indicates, the bear market is about to start in 2014. Get yourself ready.

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Why Stocks Are Poised For Huge Losses In 2014

December 31, 2013

How To Make A Killing in 2014

BloombergWrites: Subprime Loans Are Boosting Car Sales

A woman came into Alan Helfman’s showroom in Houston in October looking to buy a car for her daily commute. Even though her credit score was below 500, in the bottom eighth percentile, she drove away with a new Dodge Dart. A year ago, “I would’ve told her don’t even bother coming in,” says Helfman, who owns River Oaks Chrysler Jeep Dodge Ram, where sales rose about 20 percent this year. “But she had a good job, so I told her to bring a phone bill, a light bill, your last couple of paycheck stubs, and bring me some down payment.”

The New York Times Writes: New Boom in Subprime Loans, for Smaller Businesses

A small, little-known company from Missouri borrows hundreds of millions of dollars from two of the biggest names in Wall Street finance. The loans are rated subprime. What’s more, they carry few of the standard protections seen in ordinary debt, making them particularly risky bets.But investors clamor to buy pieces of the loans, one of which pays annual interest of at least 8.75 percent. Demand is so strong, some buyers have to settle for less than they wanted.

A scene from the years leading up to the financial crisis in 2008? No, last month.

It’s scary how predictable human animal is from the psychological perspective. In fact, contrary to a popular believe human psychology IS the primary driver behind the stock market volatility.

Just two quick observations. First, as the articles above indicate the subprime is back in a big way. In 2003-2007 it was the real estate market, where anyone who could (and even those who couldn’t) fog a mirror could get a massive real estate loan. Today you can see the same situation in car loans and loans for small businesses. Thank god the amounts are smaller. Second, the speculative bubble and the frenzy building in the stock market. Everyone is falling over each other predicting the Dow 20,000 or up +40% in 2014. Of course, exactly at the wrong time.

Where were these people at 2009 bottom? Did any of them predict the DOW going up over +150% between 2009 and today? Of course they didn’t. They were too busy screaming that the world is about to end and we are on the verge of another great depression. Now, with credit easily flowing again, we are committing the same mistakes. Those who can take a step outside the box should now be able to see how easy it is to profit from such insanity.

As I have said so many times before, the bear market will start in 2014. Get ready to short overvalued garbage and make a killing.

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How To Make A Killing in 2014

November 27, 2013November 27, 2013

A Secret Way To Make A Killing In The Stock Market Over The Next 12 Month

BloombergWrites: Subprime Loans Are Boosting Car Sales

The New York Times Writes: New Boom in Subprime Loans, for Smaller Businesses

A scene from the years leading up to the financial crisis in 2008? No, last month.

It’s scary how predictable human animal is from the psychological perspective. In fact, contrary to a popular believe human psychology IS the primary driver behind the stock market volatility.

As I have said so many times before, the bear market will start in 2014. Get ready to short overvalued garbage and make a killing.

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A Secret Way To Make A Killing In The Stock Market Over The Next 12 Month

November 3, 2013November 4, 2013

Secret Government Calculation Guarantees Full Employment By 2017

BusinessWeek Writes: The U.S. Job Market Won’t Be Normal Until 2017, Says Goldman

Two economists at the Federal Reserve Bank of Kansas City concluded recently that at the current rate of progress, the U.S. labor market won’t get back to normal until the summer of 2015. That’s bad enough. But Goldman Sachs (GS) economists, examining the same data, conclude in a report today that normal might not arrive until the beginning of 2017.

Either way it’s pretty depressing, considering that the recession began in December 2007. The financial markets are betting that the Federal Reserve’s rate-setting Federal Open Market Committee will start tapering purchases of long-term bonds sometime in early 2014. But the FOMC has said that the purchases will continue“until the outlook for the labor market has improved substantially in a context of price stability.” If the FOMC sticks to that commitment, bond purchases could continue longer than many people expect.

I really have no idea how they come up with these numbers. Maybe they have a supercomputer in their office churning out billions of calculations per second or maybe they just throw darts at the calendar. I think the latter is more plausible.

The problem with their analysis is they are discounting continual economic growth over the next 5 years. Well, let me ask you something. What if instead of economic growth our financial markets and our overall economy go through another severe contraction as I constantly argue? Are we going to normalize by 2017 or will the chart above take another dive? I think you know the answer to that.

The labor market in the US is facing strong headwinds. I think the situation we have today is the new norm and even that will continue to deteriorate. With our economy, financial markets, Obama care, outsourcing, robotics and higher productivity rates all putting negative pressures on full time employment, the labor market picture going forward is not pretty.

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