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Albert Edwards: Here Comes The Next Leg Of The Bear-Market
With the dollar surging, and with correlation momos no longer having a clue what to do courtesy of all correlations having recently broken down, here comes Albert Edwards to pour even more cold water on the rally, prophecying that the next leg of the bear market is just around the corner.
At this time of year I normally get requests for year-end forecasts. My erstwhile colleague, James Montier, always used to tell me never to offer pin-point forecasts as they are a hostage to fortune (in addition, he felt passionately that investing should not be based on what he termed the folly of forecasting).
But when I do give forecasts in a moment of weakness, often they appear extreme. Some clients have taken such umbrage that they try and get me fired! With that pressure not to stray too far from consensus, most sell-side analysts? forecasts end up as consensus mush ? and if they do deviate from consensus it is almost always on the bullish side. The industry quickly forgives a bull who is wrong whereas an erring bear must be hunted down, hung, drawn and quartered. Hence the industry gets what it deserves: economic and market forecasts that either call for mean reversion or which stick close by the current spot rate (with their usual bullish bias). But in reality the world is seldom ever like that.
Regular readers will know that many of my more extreme predictions have had an annoying habit of eventually coming true, albeit with the usual heavy dose of poor timing. Certainly when I see the current extremely low number of equity bears (the lowest since the market top of 2007 - see chart below), the likelihood is that the next leg of the long-term structural valuation bear market is closer than people might realise.
Next on plate: poor technicals and an H2 rally that has been running almost exclusively on fumes and liquidity rebate seekers.
The very weak German new orders and production data for October has certainly put a dent in the cyclical optimism that has abounded for most of this year. My own view is that the markets will march to a very different drumbeat next year. Chartwise, the S&P seems to be stuck close to its 50% retracement level from the October 2007 peak. In addition, many technical analysts are noting the poor volume and the divergence of the Relative Strength Index (RSI) which has made lower highs through the rally in the second half of this year (see chart below). This is seen as the H2 rally lacking strong technical underpinnings.
And even as the secular trend is ever lower (think Japan), the likelihood of such bear market rallies is always present (again, think Japan).
Our structural bearishness has never precluded participation in cyclical rallies. We have regularly observed that in Japan, the Nikkei used to enjoy strong cyclically led rallies of 40-50% (see chart below). But with the market still some 75% below its peak, investors tend to forget these rallies and only remember the gloom. A long-only equity investor could have made good money in Japan since the bubble burst.
Here is why leading indicators themselves are leading indicators of a major leg down:
The secret to making money in Japan was to remember to exit just as most investors had become convinced of a self-sustaining recovery. Investors should have sold as the leading indicators began to turn down (see chart below). They needed to sell despite protestations from economists that we were set for a mid-cycle pause and strategists telling us that the market was much cheaper than had been seen in recent years. In each case the sanguine voices were proved appallingly wrong. Even moderate fiscal tightening would pitch Japan?s economy back into recession and the Nikkei made new lows. At the stock level, my Quant colleague, Andrew Lapthorne, has demonstrated that in Japan value/momentum strategies needed to be replaced by reversal strategies (buying the losers/selling the winners) ? link. The buy and hold era was crushed by the reality of economic and market volatility.
And even as investors should have had years of practice with the Japanese model, they have yet to apply it to America. The problem is complacency rules, courtesy of Bernanke's Moral Hazard doctrine. Which is why the rude awakening is coming with a bang not a whimper.
For Japanese investors, it took some time to learn the new metrics of investing. Today, investors have no such excuse. After all, Ben Bernanke tells us we should learn the lessons of Japan and so we must. Though many commentators want to complicate the investment business, we try and keep our advice as simple as possible. The leading indicators have begun to turn down in the US (see charts below) and so risk assets are therefore dangerous. Almost no-one will be willing to predict renewed global recession and no-one will predict new lows in equities. And with the market so bullish (cover chart) a cyclical failure will come as a crushing blow to sentiment. It is time for caution. It is time to sell.
Will momos and quants embrace the impending downward slide with the same enthusiasm they rode the wave higher? Time will tell, but if the answer is yes, expect a major overshoot to the recent low of 666 on the S&P.
h/t Alexis
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SELL!!!!
what am i saying- i sold in June
EM are way tougher to sell, if I were to sell in June, I'd be bankrupt by now...
While money and volume disappear into Dark Pools
and hidden off balance sheet OTC derivatives,
worth recalling fundamentals have not been repealed
and Perf graph of SPX is peaking bigger than 2007
and 2000:
http://stockcharts.com/charts/performance/perf.html?spx
Calm before the storm.
John Paulson's latest thoughts
bullish on moral hazard (buy GMAC bonds for 11% yield, as its like buying Fannie debt!)
most net long he can recall
but inflation will destroy us eventually
get the heck out of the dollar
http://www.fundmymutualfund.com/2009/12/hedge-fund-titan-john-paulson-bullish.html
JP the next big financial accident...
Last words of the mayor of Hiroshima:
"What the F.."
Funny how 666 is the number we are headed toward....again.
Albert Edwards is a fade. His prose his unpersuasive, and this time has passed by. But more to the point, he made the common error in 2009 of thinking that a bearish view on the global economy meant that assets had to price even lower. Now, we Mr. Edwards not already famous, such a view would have had to compete for room among the commoners in the internet's free chat rooms.
I'm no longer interested in anything he has to say. In addition to being wrong, he's boring and very one-note. Snooze fest.
I refuse to listen to anyone named anonymous. Sign up....for your voice to be heard!
word
And I refuse to listen to anyone who presents himself to the world as a clown, so we're even.
Does that not entirely defeat the purpose of an open and anonymous web forum, particularly one such as this?
Sure you can trace my IP address through an anonymous user name; but a registered account which tracks to two or three specific physical locations, and someone with enough free time could find out exactly who you are.
Furthermore, such statements place emphasis on the speaker and not the message, contriving predetermined bias with perceived expectation.
Plus, you identity is what you make it and is only marginally determined by the perception of others.
What you are saying is the validity of the statement is irrelevant since you cannot pinpoint the source. Good luck with that.
If an arbitrary voice in a theatre yells 'fire', i'll look around to verify. If a trusted known figure yells the same, I'm naturally more apt to move first and question later.
There are so many hit-and-run anon trolls and idiots out there, why wear their badge? That bias works against even the wisest of posts. sad but true.
use an avatar/pseudonym, i don't care who the clever clown is... as long as he/she is consistently clever.
cheers
judging from your reaction, you listened to me pretty much :)
Sooooo, if you find him that erroneous, what the heck are you doing here babbling on about? GTFOOH!
Six years ago, I noticed disturbing trends in manufacturers changing their interoffice billing procedures. Interoffice discounts were being eliminated or at least drastically lowered, price sheets went from being reprinted once every year or so to, in some more recent examples, on a MONTHLY basis. Slow moving products were being dropped from product lines, at least more so than before, and only the JIT corporations were really getting the message about the latest economic (read that as POLITICAL) wind.
Nothing to do with Reps or Dems, mind you; this was all to do with banking and corruption. When I read of the optimism that some forecasters are preaching, I wonder if they have been paying attention to the 114 page Annex buried in the Copenhagen Treaty, how many states like Tennessee are having armed soldiers doing full vehicle searches, and that China has already been sending troops here on U.S. soil for training exercises.
Well, it seems that the rest of the journalistic world is aware of these ODDITIES; every news agency except the spoon-feeding media here in the U.S. So, go ahead and wait for that bull market; odds are that by the time the bull comes in your direction, your home will have been turned into a WalMart parking lot.
Question now is does 10,200 hold as support.
A hard break there and the selling will kick in.
If TD is right and TIMMY's days are numbered see
(Monday morning meeting with the BANKSTERS) why not provide yourself with a little cover.
the biggest wave down is coming, it's going to bring Mom & Pop investors to their senses that they've been dupped by Wall St. & Washington. Either get out now & save what you have & convert it into gold or go down with the ship. The bottom of this market won't be seen for another couple of years.
the biggest wave down is coming, it's going to bring Mom & Pop investors to their senses that they've been dupped by Wall St. & Washington. Either get out now & save what you have & convert it into gold or go down with the ship. The bottom of this market won't be seen for another couple of years.
My continued annoyance with the bull analysts spewing "the recession is over" is peaking. Fuck these assholes. How in the world can you ethically go on TV and say the rally has a ways to go and the recession is over? How? (Greece BBB+ - shhuh?) I mean who the fuck do these greedy ass mother fucking money grubbing whores think they are dealing with? How do they fucking sleep at night ( I guess on a dollar packed mattress)? They should all be hung, drawn and quartered (in whatever order you choose). These fuckers make millions managing billions and are perpetually wrong with their Alphas hidden is some black box. This shit has to stop. Fuck them all. TD thanks for posting this. The raping of the moronic, uneducated, unmotivated, unknowing and perpetually lazy middle class will continue till all the money is gone and that time is coming fast. Fuck those assholes.
Sorry for the rant but had to gt that out.
ShankyS = walstreetpro2
welcome back to the world of the living
Shanky, this is a serious question. Do you actually trade or do you just draw charts and rant? The reason I ask is that I've never met an emotional trader who is any good, and you're about as emotional as they come on these (or any other) boards. Also, why do you worry about what bull analysts are spewing? Why does it matter to you? I'm just curious because I am so busy worrying about what I think that I don't even pay attention to what others think, other than to maybe get an overall feel for where people are. I mean no disrespect...I just find it rather bizarre. It's there job to sell advertising. You don't do that by telling the truth. You do it by being happy all the time. Duh. Sorry.
AMEN Brother!! Well said!! These people must just laugh in astonishment when the cameras are off...like Holy SHITTT--Can you believe the public just believes whatver we say STILL, after we have bilked them for trillions?!!
Like shooting fish in a barrel, I say!!
NOTHING will change until people are sufficiently pissed off and get into the streets en masse. These weasel politicians know they can't hide much longer, once people refuse to hide behind their keyboards.
1 out of 5 Americans is now on food stamps. How much more will it take?!
Whats that comin over the hill..
yea its your mum!
Einstein said, "Keep it as simple as possible- but no simpler."
According to the charts presented by Edwards, it doesn't get any simpler: use the LEI as a guide and follow the bouncing ball.
SSO
SDS
SSO
SDS
Looks like my investment plan is set for the next ten years. Maybe I'll take up fishing!
(Then again, maybe not...)
Shanky,you said it best. I kinda inclined to believe that they wont let the market realy drop far,if for anything,basically because this is what they call"confidence buildaing" stage,for the big players to achieve the next stage of"when the money is gone".
Don't worry... Leo Kolivakis assures us things are A-OK.
Buy the dips.
Note the sarcasm... I know this doesn't translate well on the Internet.
Leo does not see any major events on the horizon.
He confirmed it again last nite.
That's probably the most remarkable comment that I've read anywhere from bulls or bears.
I don't mean to outright bash Leo, because I really do respect his opinions and lines of reasoning.
Having said that, the deflationary headwinds we are encountering are being aborbed by goverments-- and this risk tranference means much higher sovereign debt risk as we move forward-- unless policy changes dramatically in a number of countries (including ours).
It's those "unforseen" events that are going to inflict the most pain on investors, I'm afraid. Personally, I don't know of any events on the horizion-- but I do know that there are risks out there that are not priced anywhere close to environment we are seeing. I'd rather hedge myself on those events than go in fully exposed to those risks.
I've been bearish, & cant stand this bernanke money printing to backstop asset markets, but leo has been right, & these guys will do whatever they can to backstop this stuff even if it means driving usd to 0. At some point they wont be able to stop the fall. but they've already held it up longer than i thought was possible.
Sure, Leo has been right with the hold-your-nose-and-buy-it plan. That has worked since early March. Yeah, yeah, trend is your friend, be long or be wrong, etc. We know, historically, that such an approach hasn't worked since the Nasdaq bubble burst. I don't think it works much next year, either.
totally agree. it works til it doesn't. There's a saying dont fight the fed. Being on the wrong side of fed moves are very fresh in my mind. After Martin Luther King day in 2008, when Europe imploded on Kerviel's trades being unwound, Bernanke came in w/ a 75 bp emergency cut. He then cut 50 bps 5 days later @ their meeting. those 3 weeks saw gigantic short covering which caused a lot of pain in my quant book I was running. Eventually, the knee jerk reaction faded, & my model ended up having a very good 2008. Unfortunately my group had gotten shutdown in Q2 of '08, so wasn't able to benefit from it. Anyway, while I wouldn't fight the fed. I love fading them. And I'm anxiously awaiting the end of at least the 'explicit' QE programs like MBS buying in march. If they really do stop. Then I think you'll see a huge reversion in this whole junk / weak dollar trade that has worked so well in 2009. Like I said i'm bearish.
You've stumbled onto the crux of the problem.
Many people believe that the Fed will drive the USD to unbelievably low levels to backstop the bad stuff.
The cold hard reality is... they won't. If they drive the dollar down too hard, too fast-- global fx will go nuts and it will be impossible to control. The Fed would seriously risk their existence as an institution if they lost control of dollar devaluation.
At the end of the day, I believe that the Fed believes more in self preservation than to protect a handful of piggy bankers at all costs.
Of course, there are ways to keep the organized crime operation going, as well as help your best customers. And for now, the Fed is content of screwing savers at 0% while giving their banking friends a cheap spread for free.
Given the stresses we are seeing elsewhere with sovereign debt, I think the USD may have some additional room for decline-- but not terribly much. Banks have been stuffing as much Treasuries as reserves and raising as much equity as possible before the next turn of events. This next turn will likely rebuild the USD, but it will come at the expense of risk assets.
If we do see something truly self-sustaining in terms of growth, I might change my tune. But I just simply don't see enough evidence that there's a compelling case for that anytime soon.
I am not the sharpest tool in the shed. However there is one thing I am absolutely certain of. Just when everyone collectively comes to believe that Murphy's Law has been safely neutralized Murphy's Law has its revenge. It appears ever more certain that not only are certain market participants and policy makers outright mocking Murphy's Law, they are challenging it. Never a happy state of affairs to this combat veteran.
Murphy's Law states that; "Whatever can go wrong may go wrong".
"Whatever can go wrong may go wrong".
Hey. that's Murphy's law in action right there...
it's "Whatever can go wrong WILL go wrong".
I'd call Leo an asshat, but that's unfair to all the real asshats.
My major disappointment with Leo was that he would not give me one data point (ONE!) as to why the economy was improving. I asked him twice and he ducked both. On top of that, he disclosed that he retirement is 90% long Chinese solar stocks. You know, in 1999, Enron was supposed to take over the business world....
Agreed. Picture the last recession. The long final leg down was the killer. The US economy now is even more hollowed-out and indebted. I may even watch CNBC (briefly) as the shills for the WS propagandists are exposed.
3 monetary components account for 50% of LEI is positive. But real economic growth (port container shipments and RR car loadings) is lagging. The misleading LEI is promoted is largely controlled by the FED's QE policies. The LEI is promoted endlessly by the media and administration.
Wall Steet loves the high unemployment numbers since it guarantees a positive yield on their major money making activities (buying/trading bonds). With high unemployment, the FED will lend to the banks at zero interest and the Treasury will issue more and more bonds.
It doesn't really matter whether stocks rise or fall in nominal terms - in real terms (i.e in erms of Gold), they are already crashing.
I hope gold goes to 2k per oz shortly, if for no other reason than to stick it in the combined asses of bernanke and summers.
The visual of a combined ass is very interesting (**)
Kind deadhead,
I am having an existential crisis. Can an ass, have an ass? If so what comes out of such an ass? And if we have 2 asses, who have asses, and combine the asses, asses, do you create a black hole event which sucks? I believe, oh great master, you are talking, not merely asses squared, nor asses cubed, but asses to the eighth power. The asses cause deflation in a great contraction, and then, in a great constipation, the blocked system sucks too much and the great inflation flows outward as the mother of all enemas (known as enemas of the state) print excess amounts of toilet paper and stuff it in the hole, in hopes of stimulating the constipation to work its way loose. The black hole explodes with the excess stimulation. Everything goes to shit.
Oh Master, help me understand. Please don't combine the asses, asses. It could be the end of the world as we know it.
Yes, this is corny and silly. Yes, I should not drink wine and post.
Butt it all seems so clear to me now.
The head of the Fed is an asshole who sucks who helped cause a deflation that will lead to inflation.
Did I miss anything?
LOL!!
With the way things are going, we could wait years for this rally to end.
As a contrarian , relative to all of your comments,
maybe I start buying now
Bill Ackman is now a REIT bull and predicts the REITS will be in a bull market for the next 5 years. Remember Ackman? He is famous for shorting Fannie Mae and Freddie Mac and Ambac. Yes, Ackman is now a BULL. His GGWPQ has gone from 33 cents to over $10.00
http://investmentlinebacker.blogspot.com/2009/12/bill-ackman-of-pershing...
RE: Ackman
50% retracements are a normal occurance, ( yes, even in a bull market ) getting bullish IYR at $32 to $36 might make sense (if you are a bull). Everybody is bullish at highs, bearish at lows.
Marla posted on legislation (look for the silky undergarments post) that looks like it will open up funds for more than just the too big to fails. If wave one is home mortgages, wave two is going to be commercial real estate. I think they anticipate bailing out a lot of commercial real estate simply because so much of it under pins pensions, annuities, and other retirement vehichles. Some of these folks are actually buying up dead commercial real estate. I think the plan is to get "bailed out." Get the real estate at depressed values, mark to fantasy, then cry "help me, help me," become a holding company, and then qualify for a bail out. Exchange toxic assets for good, use real money to make money. Stick Fed (taxpayer eventually) with so called assets.
If I am right, and Ackman is confident this legislation will pass, then he is right to be bullish on REIT. If you build yourself up big you will be too big to fail.
Simon, the mall dude, just bought up a bunch of properties from his competitor who is going bankrupt, taking their debt too. http://www.themonitor.com/articles/simon-33314-outlet-marcos.html
Sounds like a plan to fail big, don't you think?
I know I am leaping around here and there, I don't have "proof" but I am going to watch this like a hawk.
I have no skin in this particular game beyond seeing if I can call the crimes before they happen.
Thanks for bringing this up, MsCreant-- I think these purchases are one of the most fascinating things as the CRE crisis come to a head.
Here you have some select entities that are using capital and levering it to take risks that most rational investors wouldn't normally take. Except there is an expectation that the government will come to the rescue yet again.
But will they? At the worst part of the financial crisis, the Congress had to rely on the Federal Reserve to autonomously make fiscal policy decisions (buying MBS securities). The Fed didn't mind at all, because their constituency got a huge windfall.
So this time around-- with the public gumbling about moral hazard, too big to fail, and let's boot the Treasury secretary-- there will somehow be legislation that will let CRE fat cats off the same hook??
I think a better possibilty is the prospect of TARP being the mechanism to bailout major CRE investors-- even though the purpose is to help "taxpaying homeowners".
TARP has been misused once-- why not again?
perhaps they're building a debt-laden behemoth such that the "drivers" get bought out as they hand the gub'mint the keys? not for the bail-out, but rather the socialistic result (see banks, automakers, etc.)
stranger than fiction
I think both of those are one and the same, folks get rich helping convert to socialism.
'We may become the makers of our fate when we have ceased to pose as its prophets. It is always flattering to belong to the inner circle of the initiated, and to possess the unusual power of predicting the course of history. Besides, there is a tradition that intellectual leaders are gifted with such powers, and not to possess them may lead to loss of caste. The danger, on the other hand, of their being unmasked as charlatans is very small, since they can always point out that it is certainly permissible to make less sweeping predictions; and the boundaries between these and augury are fluid. If you know that things are bound to happen whatever you do, then you may feel free to give up the fight against them. You may, more especially, give up the attempt to control those things which most people agree to social evils, such as war; or, to mention a smaller but nevertheless important thing, the tyranny of a petty official.' -Karl R. Popper
'I'm not afraid
Of anything in this world
There's nothing you can throw at me
That I haven't already heard
I never thought you were a fool
You've got to get yourself together
You've got stuck in a moment
And now you can't get out of it'
-U2
'For a moment there, I thought we were in trouble'
-Butch Cassidy
As stated previously on this blog: During the First Great Depression the Unemployment Rate peaked at 23.53% in 1932, 24.75% in 1933 and 21.6% in 1934.( Source :U.S. Bureau of the Census, Historical Statistics of the United States, Colonial Times to 1957)
Back in those days, before the Federales massaged the relevancy of statistics into the pablum narrative rabbithole it was pretty simple to calculate the unemployment rate.
In 1932 there were 12,060,000 unemployed out of a labor force of 51,250,000, returning 23.53%.
In 1933 there were 12,830,000 unemployed out of a labor force of 51,840,000, returning 24.75%.
In 1934 there were 11,340,000 unemployed out of a labor force of 53,140,000, returning 21.60%.
Of course back then the labor force grew, now we bid the unemployed adieu.
And back then the labor force was 'defined' a tad differently.
From the Congressional Research Service's : The Labor Market during the Great Depression and the Current Recession.
The 1940 census of the population was the first statistical undertaking to include questions on the labor force defined as persons who are employed or without jobs but actively seeking work within a prescribed period of time. Before then, the 1930 census of the population, the 1937 census of unemployment, and the occasional survey conducted in various states and cities utilized a very different concept—the “gainful worker”—that is, individuals who had at some time worked in an occupation in which they earned money or the equivalent, or in which they assisted in the production of marketable goods.
With passage of the Fair Labor Standards Act (FLSA) in 1938,the age limit for employment in manufacturing industries was raised to 16 years, which effectively reduced the number of job opportunities for young persons. This, in turn, might have prompted some teenagers to refrain from entering the workforce and instead, remain voluntarily in school after reaching age 14.
The increase in unemployment was greatest among young workers. The number of unemployed 14 to 24 year olds rose by 251% between 1930 and 1940. The Fair Labor Standards Act (which prohibited 14-and 15-year-olds from working for manufacturers) effectively limited the job options of the very youngest workers as well.
AM here : Was under the impression that in the First Great Depression the Unemployment Rate counted everyone over the age of 16 that did not have a job. In a previous entry had stated: In 1916 the Child Labor Act passed, setting a national minimum age of 14 in industries producing nonagricultural goods for interstate commerce or for export and the Keating-Owen Act passed, forbidding the transportation among states of products of factories, shops or canneries employing children under 14 years of age, of mines employing children under 16 years of age, and the products of any of these employing children under 16 who worked at night or more than eight hours a day.
It would appear though that prior to 1938, there were a lot of unemployed 14 and 15 year olds that were included in the unemployment rate.
That makes the following study even more frightening.
It speaks for itself: the first column represents 12/07 and the second column represents 12/09.
Center for Working-Class Studies at Youngstown State University
DE-FACTO UNEMPLOYMENT RATE
Officially Unemployed 4.9%, 10.0%
Marginally Attached .8%, 1.5%
Discouraged 02%, .05%
Underemployed 3.1%, 6.0%
Excess disability 6.0%, 6.0%
Government programs 4.0%, 4.0%
Subtotal 18.52%, 28.35%
Definitions:
Officially Unemployed- Persons who worked less than one hour during the nationally determined reference period (one week), looked for during this period, and were available for work during this period.
Latent Job Candidates
Marginally attached workers - Persons not in the labor force who want and are available for work and who have looked for a job sometime in prior 12 months (or since the end of their last job if they held one within the past 12 months), but were not counted as unemployed because they had not searched for work in the four weeks preceding the survey.
Discouraged workers - Persons not is labor force who want are available for a job and who have looked for work sometime in the past 12 months (or since the end of their last job if they held one within the past 12 months)
Underemployed -Persons who would like to work full-time but are not able to do so for economic reasons such as unavailability of full-time work or reduced demand for hours by current employer
Excess disability - Persons who are excluded from labor force because of sick leave or early retirement
Government Programs - Persons receiving government subsidized or government provided programs. For example, low wage workers receiving Earned Income Tax Credits
These estimates may be low given what has happened in the economy and the lack of current data. For example, individuals going to colleges and universities have increased dramatically during the current recession/regional depression but are not counted as part of labor market
For more information about the de-facto unemployment rate, contact John Russo at the Center of Working-Class Studies at jbrusso@ysu.edu.
AM here: Kids say the damnedest things don't they?
Good luck going home and explaining to your relatives living in the matrix that it is a Great Depression ... maybe you can try grounding some red pills into the gravy.
I'll go ask a smartypants about the age 14 thing and let you know in an add-on.
But let's be clear, of course it is a Great Depression.
It is not merely a question of semantics, it matters. How can we the people have any voice to articulate the solution when we are being corn-fed a specious premise?
Lies have consequences.
Americans love lies. Especially if the lies come from someone making big bucks or are in high places. It is easier to wine about how you 'got dupped' then do your homework. Look at the last 10 years how every lies was savoried. I used to warn all my friends of what was coming, info gathered here and from many sites including Bill Fleckenstien, but no more. Less than 5% listened, the other 95% listened to their 'paid to play' managers and politians, and are all down to where they were 10 ot 30 years ago in net wealth. No one wants to hear the truth, 'they can't handle it". But next year when the tax base is gone, and no credit to be had for the USA, the chickens will come home to roost, and there will be no cheese to go with that 'wineing'.
Its' a damn shame
I agree that the equity markets are overvalued. In fact when the government took over everything back in about Mar 09 the "real" value of equities became effectively zero.
I then stopped anything to do with paper, including trading or investing except a necessary amount in my bank account.
As long as the paper machine is in operation anything is nominally possible with equity prices. Even Jim Rogers is scared to death to short this market and has even quipped that it could go to 50,000 on the Dow.
Please obtain some physical metals if you can so you can become your own independant bank.
With Capacity utilization at aroun 70% and unemployment at 10% it's a little bit difficult to have that kind of inflation. Moreover, we have record consumer credit contraction pace for the american consumer and tighter lending standards for businesses.
How can you people go om and on rambling about inlation, DOW 50k and dollar death when the danger I see is deflation??....The printing press is operating, I agree, but money is not flowing to the consumer nor to the bussineses, only to some asstest including metals that are speculated heavily right now and do not have anything in common with fundamentals.
Albert Edwards is so right...Sell now, gold will sell to 800$, EURUSD 1.30 and DOW to 7k again.
But you can sure have inflation's unwelcome cousin, hyperinflation, if you keep printing your brains out and debasing the currency to hide bad debts. That is the threat, not "inflation."
Well it depends on what happens to the money you print. If they reach Main Street you will definetely have hyperinflation, but thats a very remote possibility. However, if they stay on Wall street - which is the case now - you cannot have hyperinflation, you will only have inflated asset classes, and inflated assets do not translate into hyperinflation so long as you have spare capacity in economy.
+10000
Inflation requires velocity. Paper money being printed, in and of itself, does not constitute inflation.
Does velocity matter if everyone stops having confidence in the currency itself and runs to anything but? I suppose it is possible that we could become the lesser of all the evil fiats, but we have been at the top of the feeding chain, and feed we have. The resentment we have for Dubai, what of the excesses here? I think the rest of the world could blame us and cut us out of the deal. Hyperinflation or currency collapse, does not give a rat's ass what bank is holding what reserves that don't make it to main street. They flee/divest, our dollars are meaningless.
a coupla weeks ago, bernanke asserted that the internal/local impact of a lower dollar wouldn't have a large impact on most americans. i gathered that he believes that our internal pricing between ourselves would remain mostly stable (assuming oil/energy are also stable). imports would naturally rise, but we could handle that, as we still produce most of our basics, save oil.
if he really believes this, and it is based on some well-understood behavior, then many of his actions make more sense, as much as they seem to go "against the grain". he may well intend to devalue the USD to the world, while limiting the internal damage through limited internal monetary release.
witness that we americans cannot really get money - loans are all but unavailable, credit cards are at 30%. While some of us are redeeming our 401ks at 'inflated' values, that's a relative trickle. We cannot actively play in this inflationary game... our pocket cash is still fairly real at our local store (deflationary if you ask mish...).
how does this unwind? i dunno. the growing debt seems too huge to manage, and we cannot be completely insulated 'inside' from a default 'outside'.
i dunno...
"witness that we americans cannot really get money - loans are all but unavailable, credit cards are at 30%. While some of us are redeeming our 401ks at 'inflated' values, that's a relative trickle. We cannot actively play in this inflationary game... our pocket cash is still fairly real at our local store (deflationary if you ask mish...)."
that's spot on! the american consumer cannot get his hands on cash nowadays, that makes it hard to conceive any danger but of deflation...currency debasement does not mean hyperinflation so long as the US can produce what it needs to live on except for an oil shock.
This is a fed-induced,-pumped and -sponsored rally. They show no signs of raising rates soon. I would expect more uppage into next year - note elections are nearing, TARP as ZH notes had been extended till then, equities likely to remain pumped till then. Of course does not mean a 10% correction could unfold, any time.
To rebut Edwards, who says we can't make a run at the next Fib level around a 61% retrace at 1220?
Whatever. Just buy gold.
NEVER understimate the replacement power of equities within an inflationary spiral.
SELL! you did enough buying the last 100 years. stop it now!
My reinforcing clue is the ratio of insider 'sells' to insider 'buying'.
This says bail out and stay out for the foreseeable future. I'm outsidelookingin long on physical precious metals and tend to agree with this prognosis set forward.
The rude awakening coming indeed! CYA!
I'll take some of that. Unless they have a way to "fake selling" and "hide buying" which, with these crooks, I leave open any damn possibility. With that said, if we trust the numbers, their escape parachutes deploying is all we need to know.
Today is such a snooze. My head keeps hitting the monitor and waking me up. I'm ready for some fireworks!
"Even Jim Rogers is scared to death to short this market and has even quipped that it could go to 50,000 on the Dow"
Apparently Rogers and the Bulls don't use charts, the charts have the same look as all the pre- Crash patterns of the past. Those bulls are the same people that say "nobody" could have seen the housing/credit bubble blow-up coming.
http://www.youtube.com/watch?v=LNstCqp6wx8
Try some SDS or SH for a mid-term play.
We're due for a correction.
...for last 7 months.
Oil plummet.
XOI and OSX merley down.
Makes no sense to me
Nothing makes sense in the markets these days as pertains to ratio of net profit to gross outlays and good old fashioned 'hard nosed' rummaging through financial reports.
The so called 'investing' in these markets is all by speculation and rumour mill, with free money from the taxpayer to play with. Coupled with HFT and dark pools, by even darker cloaked characters banging away on distant keyboards in dark back rooms.
Now there you go again, telling it like it is. Too much reality, come on now, cut it out...
I admire Al, he's obviously and intelligent, erudite, intellectual, but most of all, he's consistent. Consistently wrong, consistently early(like a decade on his original bear call), and consistently sure of himself. One thing I wish is that he could consistently make money. The only way I've been able to make money is consistently doing the OPPOSITE thing he recommends.
Thanks for the post, I was wavering until I read it. I'm reaching in with both hands and buying.
Let it ride!
Lets consider for the moment that we are in a new investment paradigm. Where extrapolating historical trends to the existing dynamics are not valid solely on their own. Government intervention and market subversion, either directly or through the banks, have skewed US fundamentals.
We are in, what I call a global volatility (events) and trigger period. Global volatility refers to currencies, sovereign defaults and conflict, and Triggers to US economic events like government intervention, Treasury sales and State budget shortfalls.
We can watch our fundamentals and glean some historically relevant data, but we must also understand that events and triggers are just as significant in influencing the market. Obviously, this is a sad position for the US, and one that could have been avoided if we had honest government leadership.
Drawing parallels to Japan, are just academic in my opinion. The US, with the collapse of the tax base in a time of massive de-leveraging debt, rampant bank failures, and misguided government intervention and mal-investment, is inherently more volatile to equities.
Ex #1, RMBS and CMBS; If the only buyer in a market pulls out, what is the expected effect on price of the underlying assets?
Ex #2, Treasury Yields; If the majority buyer pulls out, what is the expected effect on yields in order to sustain sales?
Government subversion inherently creates market volatility. The only chance for stabilization, is if the BHCs play an active role in speculation, to correct the underlying weakness in assets relative to the real economy. At some point, the inability to sell debt at low yields, will force a market price correction. Exposing risks relative to base asset class. Losses will be realized, and without systemic risk, exposed banks will be allowed to fail.
Mark Beck
The government is moral hazard.
Videogamers subsidizing high-frequency traders?
http://www.securitiesindustry.com/news/-24360-1.html
if we can print all the money we need without destroying the value of a dollar, why would need for anything ?
If every one believes in Santa Claus, Christmas will come every year.
The answer is that you come up against limits in the system, regardless of what folks believe, that won't allow everyone to get what they need, no matter how much you print. At an extreme, I can believe the dollar is strong and good, but if there is no food around, it does not matter how many of them I have, or what I and everyone else believe.
um, yeah. thanks for the update but what exactly did it say other than basically, look out kinda but we're not sure but we kinda think so cause our "indicators" (which are ANYTHING but) kinda say something but not really, so, um, look out?
was there anything that was new, nuanced or detailed ? i did read it twice and was just wondering when they were going to actually explain statements like
If anyone finds where they provide any actual answer other fundamental and amorphous garbage about l'ook how this kinda, sorta was almost close' ... do please let me know. even though I agree with the vast majority of what was said, there was such little actual explanation or effective employment of said metrics, which are rather specious tertiary indicants of coincidental causality to begin with who have such little value until well after the fact. moreover, they have no quantification and very little good reason provided for why !
it is just so infuriating see lazy analysis over and over and over. it's one thing to publish sell-side fluff, it's another to make calls, let alone call market tops, with rather loosely compiled data and scantily composed rationale (within a fundamental piece).
am i really that f'ing stupid to think that some analysts might still care more about what they're saying instead of how easily digestible it is ?? and no offense to the piece above, which is quality ... it's just that they easily could've made an actual case of substance instead of just another summary piece with nothing new to add to what bajillions of folks have already said, much better and much clearer, mind you; so ... what is the point ?? apparently, i'm just a naive clown looking for actual insight let alone something actionable.
- they have gone on to scarborough, deal with it.
Millet Oakseed Moss. et.al.
rusty , flipe some clearlights this way will u Dr?
when i grow up, i wanna be an old woman
assetman and dumbquant comments are spot on...
site is bookmarked now.. btw this is just my second post here
I'm a sympthom of the equity bubble, an user from Brazil.
LOL
From the talk here it seems like perhaps Neil Howe etal may turn out to be right and the US is due a revolution of sorts. You may see those slime politicians and bankers taken out the back and shot after all. i'll watch from South Africa, with luck we have already had our revolution.
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