MORGAN STANLEY ZIET EEN CORRECTIE…

…of zef maar een crash ahead, van min 25 %, aldus The Daily Reckoning.

According to Morgan Stanley economist Gerard Minack, the stock market is in for a correction after its 9-month “relief rally.” In a note to clients Minack wrote, “We see the rise from March 2009 as a typical relief rally that follows major bear markets. Those relief rallies can occur regardless of underlying macro conditions, regardless of liquidity conditions and – most importantly – regardless of what happens next… We think risk assets have swung to pricing a better outlook than is likely.”

Minack says that a 25% correction is now in order. To be fair though, he doesn’t think the market will make new lows after that, only that it’s gotten way ahead of itself at these levels. The Grand Old Man of Dow Theory, Richard Russell, is even more direct. He’s predicting a “second round of pain” for stock markets. “I note that most analysts are now bullish,” he observes, “and that they are recommending stocks for the ‘continuing advance.’ At the same time, most economists are optimistic, arguing that the ‘longest recession since World War II has ended.’

“Typical,” Russell gripes, “last March everyone was bearish and the market was establishing a temporary bottom. Now that everyone is optimistic, the stock market is topping out and the public (the amateurs) are about to receive their second round of pain.”

What to do?

Last time the world’s financial markets panicked, something strange happened: the US dollar and US bonds rallied while stocks, commodities, and emerging markets sold off. The same thing could be happening now. It’s not so much a flight to quality as it is a flight to liquidity and a massive case of global risk aversion.

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