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Confidence-Market Divergence Accelerates
The last time we got a -2.42 standard deviation between confidence and the market, things got real ugly, real fast.
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I ran the same chart with CONCCONF Index - the headline consumer confidence figure - and the chart is far less convincing. Why could that be so?
Most bears would argue the whole notion of a recovery is propaganda. The success/failure of the propaganda would most likely manifest itself in the CONCCONF.
You are commenting at a strongly bearish blog/site.
depending on methodology p/e ratios are any where
from 40-100...this is absurd when gdp is
contracting and gnp is contracting even faster....
there is no scenario in the next 6-12 months
where corporate earnings and economic soundness
could possibly justify p/e ratios that high.....
no matter whether you are a deflationist or
inflationist the system is simply without
stability.
an economy requiring daily and hourly interventions
by the government is by definition unstable....
the government has no exit strategy for its
interventions...
I actually agree that valuation is absurd.
I don't agree with the follow-on idea that there is a 100% chance of another valuations drop. I think it's possible the general wisdom from the players keeping things inflated is this is better than a quick, painful trip to fundamentals-based market valuation.
By all appearances they have the means to keep this one going and it looks like they will.... But this argument and an investing strategy based on it is practically impossible to discuss on this site.
i am not convinced that the government and its
agents can indefinitely levitate all markets....
as for the stock markets it seems that it is
capable only of propping it up on light volume....
if large volumes ever return i believe that they
are totally screwed....
of course this leads to the notion of imperial
overstretch....the government is finding that
it has to manipulate all major capital markets -
gold, equities, bonds, real estate, currencies....
not only does the government lack the resources
to continue that ambitious a scheme indefinitely
at some point it will be overwhelmed by events
and the juggling plates come crashing down...
it may take a while but the markets will
eventually demand error flushing or the system
collapses of gangrene, blood poisoning and a
host of other self induced injuries regardless
of what the government does.
even if markets move side ways for an extended
time, time is money and represents a loss....pay
me now or pay me later, but pay me you will
interest included....
That was before GS and the crew got their shit together. We'll see. I'm short.
Here's a population survey of one (r^2 = 1): My confidence as a consumer is extremely low.
If you are a producer and you are reading this, take my sentiment into account as you generate earnings growth forecasts; your green shootie-ness may cause you to write checks with your mouth that your quarterly statements can't cash.
sooner or later the disconnect between reality and current market valuations will be "reconnected." It wont be pretty when it does so. Then again, can they manipulate market levels until reality catches up with the manipulation and then put on the brakes -- so it evens itself out? I mean, ill tell you right now, i have been suspect on this rally from day 1.
All of a sudden there was a meeting with obama, where its reported that he told people, no one was "buying" what they were "selling" to the public. The next day began the puff parade. It all seems like coordinated bullshit to me. dont think that makes me tinfoil, but it makes me curious.
I think most people who are not pumping shit are skeptical at this market. There really is no logical reason for the market to be going up besides the invisible hand of the govt and the blatant “green shoot” propaganda being spouted by The Beard, Tax Cheat Timmy, Barry, etc. And when reality does set in, and it will it’s going to be ugly. The timing is just the hard part to figure out. Everyone keeps saying the fall but I think they can keep this going even longer. Any thoughts?
I really think this thing hinges on the action in the bond market. If rates start storm trooping up again after some bad T sales, or some nasty ever expanding budget deficit, they will have no choice but to crash this market, remove support and hope people will still flock to bonds in a "fly to safety" trade in order to lower the rates. They cannot do it through printing money, so maybe they will need to incite panic. It is not in the governments interest to have high yielding bonds. IMO, that is the worst case scenario for this bastard, illicit control mongering "government" of ours. But then again, a lousy market kills consumer spending and hacks away at the psychology of the market participants.
I agree. If the stock market crashes what is the next safest investment? T-Bills. They can then get the sheeple to buy T-Bills like crazy so they can keep on spending.
Uncle Ben wants a 4 percent mortgage rate, which is impossible if he continues to throw liquidity into the system, as both fear of hyperinflation and "risk appetite" drive bond yields the wrong way. It is simply not possible to support both the stock and bond markets at once.
So it's either: loose monetary policy/green shoots/high rates; or induce a fear trade into Treasuries by hammering on stock prices.
The correction will mostly likely happen either in August, or October (the bad month). The Fed recently announced that it will begin unwinding its alphabet soup programs, which will drain liquidity from the system. Record Treasury sales are occurring in conjunction. This will ultimately end up crashing the market and forcing people into Treasuries.
As for foreigners buying Treasuries, you have to look at the way governments are trying to stimulate their economies. For example, the bulk of China's fiscal stimulus is being spent on exports. The US dollar as the world's reserve currency doesn't make things any easier for them either -- US dollars can't be spent domestically.
Thus foreign central banks, they have no choice but to continue to fuel America's capital acct surplus.
"Fed recently announced that it will begin unwinding its alphabet soup programs, which will drain liquidity from the system."
Watch out for this. This is what I have called "faux liquidity," and can easily be pumped back in. Don't bet against this sort of Fed shenanigans.
In the end, what matters is what I have always said matters--the only thing that matters--the underemployment rate among those who have a Bachelor's degree or higher. These are the people who run things in America. It's still low. When it gets to 50% we'll have our little revolution. Until then nothing of substance will change. All very boring. The usual bourgeois economics and politics. Who cares?
It's hard to keep track of people name "Anonymous" lol! I agree that they can easily pump it back in. All I'm suggesting is that this is the way they will scare money into Treasuries: dollar scarcity, which would also drive up the value of the USD. As for your point of graduate underemployment, why do you think this will be what sparks the next revolution? Arguably, most (all?) the revolutions in history happen when income disparity is at its highest and people don't have enough to eat.
Not true. The economy was fine when the American revolution happened, and it was fine when various failed revolutions happened, such as the Civil War. The right wing revolutions in both Italy and Spain occurred at a point far above economic catastrophe.
However, you have a much better chance of a revolution when unemployment reaches catastrophic numbers. That is the case with the Nazi revolution and with the Russian revolution.
American suburbia is the largest economic force in human history. This is going to be one big sucker to bring down. It would have daunted Stalin. But day by day, event by event, inch by inch it is being accomplished, for the usual reason: the target has no new ideas. Suburbia has no new ideas to replace the growth idea. Maintenance of what exists means you have to have new rights. And no new rights are proposed with respect to any facts. Property rights? OK, but what in fact is property? Nobody knows, and the scrutiny regime (West Coast Hotel, 1937) stifledall inquiry into the facts. Which is why the property rights movement can do nothing but put a spoke in the scrutiny regime wheel. It has no new ideas, because it has not investigated the facts. Very bad.
So all you have now is various components of the suburban enterprise defending themselves in any way they can. It's a dying system. But it can lash out, has done so and will do so again. Why try to reform it? As Napoleon said, don't interrupt your enemy when he is making a mistake.
Let's just watch this suburban whale expire.
Point taken -- political dissatisfaction tends to be the predominant cause of revolution. That does not negate the strong tendency for power and capital to centralize, causing workers to work for almost nothing; in extreme cases, slavery.
But even then - again to your point - a united front rarely arises spontaneously out of dissatisfaction. It is more common to see the disenchanted fragmented and dismissed as theoretically primitive. This is where Lenin disagreed with Marx: the masses need someone to whom they can look up to, someone to lead them out of bondage.
The problem I see in your theory, my friend, is that the educated tend to be pro-peaceful demonstration. If this is the kind of revolution you are hoping for, I don't think it will happen. This was the point of my earlier question on graduate underemployment.
As Zero Hedge has pointed out several times, this regime needs to be brought down from the inside. If this is how you see the educated taking down the elite, then yes, I believe this can work.
Until it comes time for a new breed of elite to rise up yet again. The strong few will always dominate the weak many. That is human nature.
It's hard to keep track of people named "Anonymous" lol! I agree that they can easily pump it back in. All I'm suggesting is that this is the way they will scare money into Treasuries: dollar scarcity, which would also drive up the value of the USD. As for your point of graduate underemployment, why do you think this will be what sparks the next revolution? Arguably, most (all?) the revolutions in history happen when income disparity is at its highest and people don't have enough to eat.
With the Fed able to intervene directly in the bond market with no one to play traffic cop and say you can't do that - because they can and do and have done - don't count on a bond market collapse unless PBoC and other CB's/Tsy's go on a buyers strike and the indirects, regardless of the rejiggered format, drop toward nil.
Where does the new R-Bond effort fit into this? Those are the instrument that will support the mandatory-enrollment IRA program the Obama administration is about to implement. Wouldn't those be a way to force the population at large to prop up the bonds market?
http://www.investmentnews.com/article/20090607/REG/906059955
"Officials in the Obama administration are moving quickly to develop the investment infrastructure behind the president’s proposal for mandatory automatic enrollment in individual retirement accounts, which could be supported by the creation of Treasury-issued retirement bonds.
...
The administration, which included an auto-IRA provision in its 2010 budget, has gained some bipartisan support for the proposal, Mr. Iwry added."
This will be the end game, force your retirement contributions into treasuries to fund account defecits. The ultimate in theivery. Someone needs to stop this guy from running our laws and beliefs into the ground. Obama is seriously going to go down in history as the bumper stickers say "One Big Ass Mistake AmeriKa" I hate this man.
This is really no different than current mandatory Social Security/ FIFA , just a very large disguised way to increase the tax
If there is some drastic collapse--which I think will be a collapse in demand followed by a spike in unemployment followed by the need for bailouts bailouts bailouts (something like $1.8 trillion this next round--in September), I think they will simply Federalize money market accounts, 401K plans and pension plans. This is much simpler than trying to get something through Congress. You know, you still own your money, it's just "in jail" and you can't get your hands on it.
Wanna know what's going on here? Americans still have $50 trillion in equity. The thieves wanna steal it. However, in order to steal it they have to destroy about $48 trillion. That's what's happening now. That's what the deflationary spiral will do. But so what? The Mellon-style "liquidators" will still wind up with $2 trillion.
Why do people say Bernanke pays attention to the Depression and Keynes? Not at all. His hero is Mellon.
Not sure I follow everything said here, but can assure you that your money can still be at risk in individualised retirement/superannuation systems. For example, in Australia we have had this system for a long time, but your money is still being managed and invested for you by the various Superfunds, so your balance is up and down with the market, plus down by a certain percentage point every year in fees and charges. Over the past couple of years, people's balances have been badly hurt, but the real problem is still that your money is "in jail", you cannot touch it until you reach your retirement age, which again can be changed and pushed out at whim by the pollies. Even when you decide to manage your money yourself in a Self-Managed Superannuation Fund, as a general rule, you still cannot touch that money, and there are strict rules and conditions as to how you can invest it. Plus, these rules and conditions, once again, can be changed by the pollies, so in the end they can make the laws in such a way that your retirement savings can be used and plundered by THEM AND THEIR MATES. There are heavy penalties for not following relevant laws, so, apart from not being able to access your own savings when you need to, they can also force you to act against your own better judgement in terms of how you should invest and protect your savings.
I don't think it makes a person tinfoil either. A lot of the 'news' that came out to justify a stock increase came from either pretty dubious reports or intentionally misrepresented data.
But think to what was in those headlines before this 'bottom' was reached - and I'm not talking about the family murders or the 'doom and gloom' headlines. I'm talking about how incomes for Wall Street types was going to be less because there'd be so much more competition in the labour market. The pitchfork crowd wanting to read the fine print or even revoke all the perceived ill-gotten bonuses. The IRS threatening to go after that sacred cow - the offshore tax-sheltered bank accounts of the super-rich. People mentioning Marx in polite company.
Can't have that, now can we?
Its my first comment on the new site, huzzah!
I am a proponent of what I call the Japanese Roll (barring a liquidity event of course).
Look at how the Nikkei fared when testing its 200DMA in early '91 after their stock market crash. The Nikkei flirted then broke out above the 200DMA. BUT the market never broke out above the initial spike after it subsequently tested the 200DMA. The market then started following the downward pointing arc of the 200DMA until it finally broke out to the downside.
This whole process from when the 200DMA was touched to breaking out below took about 4 months. - Steak
And lastly keep in mind it took the Nikkei almost 18 months after their post crash lows to take them out on the downside. If we follow them that would put us below the March lows sometime around fall of 2010, that sounds about right eh?
Would not be surprised in the least. ANYTHING seems possible in a world where some can print money at zero cost and otherwise at above and outside the law with impunity. They do what they want, while the rest of us a kept guessing as to their next move. If so, the key lesson here must be that in such an environment, you can no longer rely on fundamentals, common sense, or even precedent and history. It is a guessing game, even if not completely random and unpredictable.
rates up = markets up these days. But consumer confidence IS affected by rates going up in a negative way. More expensive mortgages, car loans, student loans, etc.
Makes sense.
The FEDury bought $7 bill in treasuries. They'll buy over $10 bill this week.
Records in treasuries -- bought and sold -- are about to be set.
The FEDury is big. It's bad. But ... you know ... there is no end in sight to deficit spending. 2010 is going to be even bigger. So ... sooner or later the money they're printing is going to make its way into circulation -- that's what deficit spending does.
The equation that was evident in the fall hasn't changed. The dollar has devalued. Our foreign suppliers either have to cut their own currency or cut exports/reduce costs. How long can Europe and China suck it up?
Answer: for a very long time, and probably much longer than you can stay solvent if you bet against the seemingly and even "clearly" unsustainable.
Uh-Oh, maybe the peeps are waking up the the fact that they have been fleeced and thrown under the bus by the banking cartel pimps and their bought and paid for government whores.
Yes, awareness is going to increase, but revolt is unlikely. After all, how long did large sections of Europe suffer under worse conditions? A very very long time, and some still do: wit North Korea. Do not suppose that these oppressed people were/are either stupid, or "sleeping". They were/are merely helpless. Same could be true anywhere else. When brainwashing and propaganda do not work, there is still the gun and the many, more often than not, will quickly learn from the "missteps" of the few who fall foul of the system.
good articles: http://bit.ly/12NCJR
Interesting consideration.
Here is another consideration: things won't get ugly fast until consumers and investors become "disappointed" with respect to their future expectations about economic growth and job growth relative to loose fiscal and monetary policies designed to spur both economic and job growth. When those expectations are dashed, then look out.
I suspect the nosedive in consuemr confidence today was related to the gm bankruptcy in June, but since gm and chrysler's mfg lines are due to go back online by Sept, this can be described (erroneously or not by bull pundits)as a short term looking in the rear view mirror event
Interesting consideration.
Here is another consideration: things won't get ugly fast until consumers and investors become "disappointed" with respect to their future expectations about economic growth and job growth relative to loose fiscal and monetary policies designed to spur both economic and job growth. When those expectations are dashed, then look out.
I suspect the nosedive in consuemr confidence today was related to the gm bankruptcy in June, but since gm and chrysler's mfg lines are due to go back online by Sept, this can be described (erroneously or not by bull pundits)as a short term looking in the rear view mirror event
true that