Simon Baker of Baker Avenue Asset Management is neither perma-bear nor bull; he's a perma-realist trying to make and keep money for his clients. So far Baker has been doing a good job for Breakout viewers. Simon came on in May and told people he was getting out of Chinese markets; the (FXI) ETF of Chinese stocks is down 27% since then. On August 15th Simon incurred the wrath of the long-side faithful by declaring "Buy and Hold" dead. The S&P500 closed at 1,204 that day and moved between 1,200 and the low 1,100's six times since.
With stocks stabilizing today after a crazy week I asked Simon to share what his latest indicators are telling us today. As usual his take is pragmatic, if a little dark. "People keep talking about whether we're going into a recession...the reality is we're here," he says.
To support his case, Baker notes the performance of copper, or "Dr. Copper" as it's called by market pros for the base metal's ability to predict economic action. Typically when copper is moving higher, or at least stable over $4, the economy is in at least okay shape. Copper is down over 17% in September, currently sitting somewhere in the mid-$3.00's.
Another portent of ill are the Dow Transports (^DJT), as evidenced by the FedEx' (FDX) horrific quarter and warning this week. "If people aren't shipping then people aren't buying," notes Baker. For Dow Transport traditionalists, weak transports mean a weak economy, which means bad things for stocks.Read More »from Global Bear Market Reality Is Here: Simon Baker