Every now and then the limit of my tolerance for misplaced optimism (what I see as a conspiracy of optimism) is met. This afternoon was one of those times.  Professor Jeremy Siegel -renowned economist- was on CNBC claiming the Dow will definitely  top 15,000 this year.  3% GDP growth in 2013 — in what world could this have a snowball’s chance in hell of happening?

Before I get into my rant, you should know that one of Dr. Siegel’s income streams comes courtesy of an ETF firm. In full disclosure, I like some of that firm’s ETFs and use them.

But I could not disagree more vehemently with Dr Siegel. The only way I could come around to his point of view would be to ignore all the points I’m about to list. Plus I’d have to assume the U.S. economy begins to contract so quickly, it scares the Fed into expanding their current QE3 & QE4 program (not that it would actually help, but they – and many stock market investors seem to think it would).

Here’s my countering argument:

  • S&P500 profit margins have been declining from all-time highs for the past year. They have a long way yet to go in order to mean revert through their long term mean.
  • The VIX registered the lowest readings since before the last mega bubble imploded.
  • Advisor Sentiment registered the same level of over-bullishness as was seen just before the 2007-09 crash.
  • ECRI says we’ve been in a recession for months already and the BEA is only now coming around to admitting that too.
  • The options action on the OEX 100 has been massively bearish, while options action on the S&P500 and broad equity market has been very bullish. This is emblematic of the smart money either hedging or loading up on opportunistic PUT options while retail investors are loading up on  CALL options that are about to get hammered.
  • NYSE margin debt is probably nearing all-time highs this month (we won’t know for another 3 weeks — I’ll post it when it’s out!). This is greed incarnate. Always present at secular tops.
  • The quality of earnings is probably going to be low in Q4 — meaning that there will be a growing gap between the earnings reported to the IRS (real world), versus the half-truth perpetuated by earnings from operations used in the financial press. Again, we’ll know in a few more weeks, and I’ll post the data.
  • The ratio of insider selling to buying has been very high. Last week there were nearly 6X the number of corporate insiders dumping their shares vs buying more. What does that tell you???
  • And finally, I’m sorry to write that retail investors have been piling back into stocks at a pace not seen in years.

The trouble with many fund company talking heads is what I’ve been writing / saying for years:  it always has to be a good time to buy my funds. The market is going higher!

Give me a break. Is anybody buying this?

If anyone finds a video of the good Dr. Siegel saying the stock market is going to head lower, please send it to me.