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Rosenberg: "The Pattern Would Suggest A Test Of 5,000 On The Dow (At The Same Time As Gold Is At 5,000 Too)"
The latest set of fundamental and technical observations from the bearish Canadian.
Well, well, so much for consensus views. Like the one we woke up to on Monday morning recommending that bonds be sold and equities be bought on the news of China’s “peg” decision. As we said on Monday, did the 20%-plus yuan appreciation from 2005 to 2008 really alter the investment landscape all that much? It looks like Mr. Market is coming around to the view that all China managed to really accomplish was to shift the focus away from its rigid FX policy to Germany’s rigid approach towards fiscal stimulus.
What is becoming clearer, especially after the latest reports on housing starts, permits, resales and builder sentiment surveys, is that housing is already double dipping in the U.S. The MBA statistics just came out for the week of June 18 and the new purchase index fell 1.2% – down 36.5% from year-ago levels and that year-ago level itself was down 22% from its year-ago level. Capish, paisan? So far, June is averaging 14.5% below May’s level and May was crushed 18% sequentially, so do not expect what is likely to be an ugly new home sales report for May today to be just a one-month wonder. Meanwhile, the widespread view out of the economics community is that we will see at least 3% growth in the second half of the year: fat chance of that.
What is fascinating is how the ECRI, which was celebrated by Wall Street research houses a year ago, is being maligned today for acting as an impostor -- not the indicator it is advertised to be because it gets re-jigged to fit the cycle.
From our lens, there is nothing wrong in trying to improve the predictive abilities of these leading indicators. Still -- it is a comment on how Wall Street researchers are incentivized to be bullish because nobody we know criticized the ECRI as it bounced off the lows (not least of which our debating pal, James Grant). For a truly wonderful critique of the ballyhooed report that was released yesterday basically accusing the ECRI index as fitting the data points to the cycle – not the case, by the way – have a look at ECRI Weekly Indicators Widely Misunderstood that made it to our friend Barry Ritholtz’s blog (“The Big Picture”).
As for the equity market, we are at a critical juncture and it could break any day. After successfully testing support at the key Fibonacci retracement level of 1,040, the S&P 500 has since bounced up to the 200-day moving average of 1,115 – and this failed to hold. Resistance prevailed. My sense is that the market will break to the downside, and for three reasons:
- Even if a double dip is avoided, the market is not priced for a growth relapse.
- The intense volatility in the major averages over the past three months is consistent with the onset of a bear phase.
- Bob Farrell believes a test of the March 2009 lows is likely. I don’t think anyone is in a position to debate five decades of experience, not to mention his track record. Louise Yamada, a legend in her own right, not to mention the likes of Bob Prechter and Richard Russell, are on this same page. Notice how none of them work at a Wall Street bank.
The chart below shows over 100 years of the Dow in real terms. There are a few conclusions from this:
- Secular bull and bear markets typically last 16 years
- During the secular bear market, most if not all of the prior gains made (again, in inflation-adjusted terms) in the prior secular bull condition, are wiped out.
Look closely at the chart and there is a very subtle upward drift – the secular low points rise over time, albeit fractionally.
This is the information contained in the chart; do what you like with it. Assuming inflation averages 2% annually and that 2016 marks the end of this secular bear episode (seeing as it began in 2000) then the historical pattern would suggest a test of 5,000 on the Dow as the ultimate trough (at that point, gold will likely be 5,000 too). This does not preclude cyclical rallies along the way, but these will be “bear market rallies” such as we saw from March 2009 to April 2010 and investors should not be tempted into any other strategy than to rent these rallies and not own them.
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Most ZHers would say to Rosenberg, "Yes Captain Obvious." Good write up though.
Not all would say that. I think Rosenberg will really be in the zone over the next few years.
You probably are right I need...... Rosenberg is more right than rest of the so called economists. It is all just mysterious to those who live on the Kool Aid the MSM feeds on the public airwaves.
From The Detroit News: http://detnews.com/article/20100623/BIZ/6230395/-1/rss#ixzz0rhQvQKPt
General comment: Correlation does not mean causation, but it does sell newspapers.
Sure the tax credit has something to do with it, but given the complexity of the markets it is just one of many, if not hundreds, of variables.
Just eyeballing a trendline along the lows, I could make a case for ~3000.
If that were to occur along with Cramoo D. Clown's departure from the scene, it would be eminently buyable.
5000 is on the way to 3000. :)
Anyway, not sure if we go that low. Personally, I think the retest of the 2009 lows is a given. If we break below that, 5000 is next (yeah, I'm being captain obvious). It really depends on what is going on in the world at the time as to whether markets continue down, stabilize or rally.
Which has the greater probability: 5,000 Dow, $5,000 gold; or 3,000 Dow, $3,000 gold? I say the latter...
With the wheels coming off the economy, what-o-what will Ben B say in 15 minutes time and what-o-what will the market do?
???Fed to introduce interest free and principle repayment free money to PD's??? Yes, free is a very good price now go buy anything, everything.
Interest rates unchanged.
The currency crash/unemployment wave kicks off beginning June 28, with markets shaking quaking event. The currency woes of July will build to a crisis point of insurmountable proportions by August 1, and the crushing economic reality will come shining through for all to see. This summer will be the absolute last peak in the markets structure, while this fall will be three months of vomiting. The summer debt explosions go to such heights as to create massive overwhelming hyper-inflation in Fall that sweeps across countries globally with such ferocity bringing down governments. Riots and mob unrest will become a regular news story as the currencies are shredded publicly and planetary panic to buy precious metals overwhelms the censors in the propaganda press. June 28 provides the flood word for the precious metals, as well as the floating away of silver from gold. New reorganized currencies will not gain support and will be laughed at when introduced. The metals, especially silver, will from June 28 onward express their own destiny separate from the currencies. -HPH
June 26-28 Gulf coast/Florida region, thunderstorms deluges, tornadoes/waterspouts, followed by flooding later. Tropical Storm forecast with 80% confidence. - Piers Corbyn (weatheraction)
Starting soon and over the remainder of this year the oil volcano will place pressures of irresistible magnitude on the populace forcing the relocation of tens of millions of Americans, creating chaos in America. Poison air and gas clouds will be visible even within the mainstream media. -HPH
Kudos to nemo for actually providing a date when the apocolyse rears it's flaming ass. So you're saying I should move my july holiday up to next week? Ha Ha Ha! You guys are so cute.
this is scarring the shit out of me ......i think u guys are little bit more relaxed than u ought to be.........havent u seen those FEMA camps in the youtube........get the FUCK OUT of USA>...i m trying to explain all this to my cousin ....but like most americans , he is also in la-la land ....
"On a long enough timeline the survival rate for everyone drops to zero"
Buy a gun, defend yourself. America is made of hundreds of cultures... one of the things that makes it great. Idiots who are prejudiced or just ignorant exist still and unfortunately can act out violently... defend yourself, your family and your home...
Hey Capitan, when you post this stuff it screws up Clif's work.
Exactly really...he should know better :(
After reading this yesterday, I have begun to put my final plans in action and I suggest everyone else to the same.
If you read his last post it won't really matter.
shhhhh....we don't want the "normies" to know where to hide
Glad to see some fellow brothers. My friends think I am nuts.
Really-
I stopped listening to my friends and I'm so glad I did....surround yourself with folks who know where we're headed and keeping doin what feels right!
Friends? you'll make a lot them AFTER the shit goes down. All I have to say is "don't show up on my doorstep empty handed, begging for food. ".. BYOF or show me some skills that I need/can use in exchange, or I'll be sending you on your way at the behest of my .308.
Sounds like with a .308, they likely won't get a chance to get close enough to show up on your doorstep.
Up close, stopping power is king.
I think I'm nuts in addition to my friends.
But he totally nailed the McCrystal news. More ominously that's supposed to be market that we're about to see the SHTF.
"Glad to see some fellow brothers. My friends think I am nuts."
Welcome to the club. You try to share this infomation with friends/family so they can prepare... a good intention. However, people don't want to hear such bad news. No one wants to be told that their way of life is about to change in a dramatic fashion.
Hey Capitan, when you post this stuff it screws up Clif's work.
Doesn´t matter, we are all f@cking doomed.
Brought to you by the Bruckheimer Financial News Network... I do agree that the weather will likely wreak havoc on the Gulf this summer..Much mayhem and panic is likely to ensue...
So, if I understand you right, the Dow drifts down to 1035 over the next few weeks then come September/October, zooms to the moon?
For that to happen, the entire world would have to stop buying iGadgets. The Apple iCult would never allow that to play out.
They may well diversify into iBeans, iJerky, iBullets, iEtc...
The main reason (in my opinion) that Apple stock is skyrocketing is people need to distract themselves with all of these fancy gadgets to keep from thinking abou the UGLY TRUTH. Ever hear about the ostrich with the earbuds?
I think you've hit the inail on the ihead.
If you connect the low of 1930 and the low of 1980 with a trendline you can get a good idea of where this bear market will eventually take the Dow.
It's got to be lower than that sinc ethe 1980 bottom was still supported by credit which is rapidly disappearing. This new bottom might just be the 1930 number. Nothing would surprise me.
Lets get this party started...
Got a short vacation planned for late July. Here's to selfishly hoping the last lug nut doesn't pop off this puppy before then! Come August, god speed.
The only piece that doesn't fit in is gold at 5,000. Credit contraction will likely fuel/accompany any market crash of the scale suggested. That suggests deflation and a drop in the price of gold.
Wishing on a star, er I mean turd named John Nadler is not good.
SD,
This time, is like no other,we're already in serious Deflation, and have been in a Depression, not a Recession for months.............all monetary PM's will be parabolic when this begins, and unobtainable, and illegal for we peons to own.................IMHO
Just curious where you will put your money? Gold/Silver seem to be the only safe place if what you say and what we think will happen.
You always want to hold the things that will appreciate most relative to other things. In times of deflation, everything becomes less valuable. In other words less valuable relative to MONEY. So the thing that appreciates most is CASH MONEY. People are buying gold and silver as speculative investments anticipating inflation. When those speculators wake up one day and find that just about everything they own is worthless, they'll sell whatever they can to raise cash to survive. That includes gold, silver, diamonds, land, and milk cows. I would expect that's a sufficient number of marginal sellers to tank the price considerably.
You couldn't be more wrong.
If gold were a commodity you might be right but gold is money - good money and it does extremely well v. other money in any uncertain times, be it inflation or deflation.
gold does best in good times...look when the highs and lows were in the last decades
sure gold is better than some options in deflation...and its a good currency hedge..but don't think it goes up in deflation
Wait, so 1980 was good times? And 1998 was bad times. And this is good times . . again?
Really?
And I believe other folks have posted that gold did well during the deflation of the Great Depression.
when stock market went down, gold went down....now after a huge bear market rally, gold has also gone way back up...not great times, but stock market doing well, gold doing well
don't get me wrong, I think gold is excellent thing to have, if nothing else but a great hedge against currency collapse...but in deflationary times, it can/has gone down...not as much as some assets and commodities, so still not a bad thing to have in deflation...
Whether commodity or currency, the world stock of gold is fixed. Not so with the worlds sovereign fiat currencies. Credit contraction will reduce the stock of money. Less money and same amount of gold means that gold will be worth less money.
Even arguing that gold is a currency, think about how it will be used in a deflationary depression. People will not be hoarding it as a source of wealth. People who have it will be SPENDING it as one of the few value stores they have left to purchase goods and services. Spend it = sell it and the result is driving the value down.
Don't think for a minute that all the gold in the world was bought with cash. How many people do you think own it on margin? How many people own gold + a whole bunch of other assets on margin. When the margin clerk has to liquidate to cover , he'll sell whatever is liquid. If he has to sell all your gold to cover your now worthless position in AAPL and GOOG then he will. And that will drive the price down.
The money that will do best in a deflationary environment is the one that experiences the greatest amount of credit contraction, because it will have the greatest demand. I'm not sure how many loans are denominated in ounces of gold, but it's likely to be far less than the amount denominated in dollars. USD will likely fare the best. Not because it's prettier than all the other ugly sisters, but because of the massive outstanding USD denominated debt to retire in the great deleveraging.
If gold is money how comes my grocer doesn't take it?
Because:
1) Your grocer has been brainwashed by 100 years of a propaganda war waged by a sociopathic financial and political elite to believe that little pieces of paper that can be issued at whim by an unelected and unaccountable banking cabal actually constitute "money", as opposed to the gold and silver that thousands of years of history, and the free choices of countless individuals in the marketplace, upheld as money instead;
2) Your government and its banking cabal allies, through legal tender laws and onerous tax regulations, use the coercive power of the State to prevent individuals from using anything but their faux-money as a means of exchange in daily commerce.
If there was deflation in basic necessities like food and energy, then gold may not go to the moon, but a visit to the local wal mart will likely convince you otherwise.
When all financial assets are deflating and other hard assets like real estate offer little real returns due to the crappy economy, fiat will chase real money, hence bidding up the price of precious metals or whatever else passes as hard stores of value.
It is certain that markets will overshoot then too, and the complete lack of confidence in financial assets will signal a time to buy.
If Japan is any indicator, we may in for a LONG wait.
Mr Mutt is correct. gold will not go up in a deflationary depression which is what will be the result if the DOW is to fall to 3000-5000 as suggested here. in a deflationary depression where are you going to keep said gold? in a bank vault? good luch finding a bank that will still be around. what about gold ETF? these will be liquidated along with every other assett class as people need money to survive. The only thing to do in a deflationary depression is make sure you have no debt as the value of your debt will increase in real terms. This is what wipes people out in a deflationary depression.The asset class that performs the best is cash, not in a bank account but under the matress. it is the only asset that increases in value. What the FED does with QE though is anyones guess. Hopefully they will all be in jail by then.
I suggest everyone read Rob Prechter's "the guide to understanding deflation" as a starting point to getting your head around deflation and give you, your friends and family the best chance of survival.
You neglect or ignore the fact that functionally, gold is the ULTIMATE cash, and so will NOT fall in price during any putative "deflation" --- which under a purely fiat currency regime is nothing more than a chimera and the desperate smokescreen of a failing financial and political establishment in any case.
As for Robert Prechter, nobody except for possibly Jon Nadler has been more consistently wrong, Wrong, WRONG regarding gold over the last decade than he has. His credibility when discussing gold is utterly shot and in the shitter.
dont get me wrong AKAK, i like gold as much as the next ZH'er and expect it to continue to perform well for now. But if full blown deflation hits it wont hold up. Prechter has been totally wrong so far but every dog has his day.
Posted more in depth above. But when the value of just about everything tanks, people will need to sell their gold and silver to get to buy anything at WalMart. If there's deflation it will go down.
That's one BIG "if". Giant, in fact.
I agree it's conditional. But that's the only scenario under which I see Dow 5000. So my only point is I don't see BOTH Dow and gold at 5,000. The way we get to Dow 5,000 is a credit collapse. That will give you deflation, no need for the "if."
People predicting dates and numbers are just having fun. All related somehow to the Dog Star and ancient Sumeria.
...if deflation suggested a drop in the Gold price . .. . it would have dropped already.
For once and for all GOLD IS NOT A HEDGE AGAINST INFLATION
Somebody is putting a bid under Eur/dlr in advance of Fed announcement...does somebody know something or is this force a correlated market melt-up?
Or is it actually possible dollar is strengthening due to Fed tightening??? couldn't be???
These "patterns" tend to come up just often enough to keep forecasters forging ahead with their futile attempts to predict future stock price movements.
Chart would probably have more of a horizontal look to it if performance was measured in the dollar's purchasing power.
He's way off! It'll be more like DJIA below 1000 before this secular mess is over!
I spoke with a real estate rep. recently, who said right now anyone with a mortage can stop paying their mortage and live rent free for a minimum of 9 months. That's the absolute minimum.
Of course the "Banks" don't want you to know this and continue to pay toward building your endless negative equity.
if you fight foreclousure, ask them to produce note etc...you could get two years rent free except for a few payments to a lawyer
DOW 1000 bitchez!
Peter Schiff called this years ago... Dow:Gold ratio going 1:1
Jeezus, Rosie always puts things in such clear perspective. Am very grateful to ZH for making his work available.
That DJ chart is truly remarkable. The recent double top suggests just how strong has been the conviction that "in the long run, equities always out-perform." (Not to mention the ZIRP and pump-n-dump effects.)
So, the fall could be quite painful if you're in equities. (I've been in cash and munis, with some AU, for 10 years. Muni exposure now running down due to calls and maturites -- thank goodness.)
But, before we all jump off a cliff ourselves, it's worth looking at the approximately 24-year period from 1896 to 1920. If we peg, say, 1995 as the start of this current phase, we could be bouncing between pillar and post for another 10 years before hitting bottom.
Not saying we will; the apocalypse always feels right around the corner. Just saying a lot more yo-yoing is possible.
So what does $5,000 gold do to the TSX Composite Index, fellow Canadians?
20,000? 50,000?
Previously, the TSX Composite to Dow ratio peaked out at 2:1.
Seems the market doesn't agree. Up up and away!!!!
Capish, paisan?
I love Rosie, but I can't think of anything funnier than hearing a Jewish Canuck trying to speak Italian.
"Capische paesano?"
All Rosie is saying, is read the writing on the wall! Plain for anybody to see! There is no need to read between the lines because the message is clear. This to shall come to pass. Gold biotches!
And he's been warning about an eminent collapse in equities for a year just like ZH. Anyone that put their money where his mouth was lost it unless they were buying bonds.
He's right IMO but understimating the ability of TPTB to limp this POS along. The system should have collapsed by the 80's if things were at all rational or tied to public knowledge but it didn't and still hasn't.
Rosie writes a good summary but he clearly doesn't have all relevant information because what's steering the financial markets is likely unseen to all but a few. Thats why so many hate Leo - his blind, naive faith (in the oppinion of the bears) pays off because something is keeping this thing going that none of us can figure out.
If you're married to one side, whether it be the bull or the bear, you're most likely to be a pissed off investor.
What is HFH?
I think you are referring to 'HPH' not 'HFH'
HPH stands for 'Half Past Human', a website run by Cliff High
Cliff does some fascinating linguistic analysis and publishes his results on a periodic basis - the snippet above is from his latest report
To receive Rosenberg's daily, sign-up via:
https://ems.gluskinsheff.net/index.ncl.html
actually, my target's lower, 2,600-3,400, but I'm short the sun too. The real question, is WHEN does the PeePeeTeam run out of money?
Dow 5000 and gold 5000 makes little sense. Dow 5000 would be *very* deflationary, not the scenario for gold 5000. It might make more sense to conceive of Dow 1500 gold 250 once much of the funny money is purged.
You evidently do not appeciate Gold's role as the ultimate extinguisher of debt.
Today is a classic bullion bank effort. They Play the Game using the basic knowledge that perhaps one day some smart folks on the other side of the table will have and use to defeat this constant end of expirary bulling and the whole PM Game.
Silver leverages gold strongly
The Silver Market is very small (especially the physical market)
Physical Silver leverages the silver market (ultimately and strongly)
To Move Gold, Move Silver
To Move Silver take deliver on every futures raid by the one Giant Silver Short
Hold the silver and never buy on margin. Just buy the silver and take delivery when the giant blocks shorts show up. Hold it.
Silver remains at less than 1/6th of its inflation adjusted high.
It is a miniscule market but has huge leverage with Gold.
The Play is obvious but every month, the Giant Government operative Bullion banks use silver to keep gold down and take it down around options expirary.
5,000 on the Dow??? I know there are a lot of Loonies in Canada but....
And the rally from 2003 - 2007 (4.5 years)....I guess that was for "renting" too? For that matter, life itself is for renting if that's how you want to look at it.
Ironically Rosie was laughing off the ECRI in the spring of 2009 as it was predicting a cyclical recovery. Rosie was so full of himself constantly explaining how the ECRI was a bad indicator. Now suddenly he says ECRI is all powerful as a predictor? Only as long as his fits his thesis I guess.
I predict a very long period of sideways movement. The oligarchy has only one tool to maintain power and that is via the markets. hose of us ho trade know how much manipulation is going on. As long as the money is cheap Big Ben can keep it floating.
Although I have no idea who is going to buy into a rally with the macro data so awful.
Guess what happens will prove what a sham the market is!!! (Or not)
This is my prediction too.....Dow/Gold parity....just like in the 30's
LOL I thought exactly the same thing when I looked at that chart. Even 2800 looks pretty much in trend.
Anyone else been watching the Baltic Dry? No one seems to be talking about it much at the moment despite the fact it seems to have gone for a massive dump in the last 3 weeks or so. If anyone ever wanted more evidence that the "global recovery" is a complete load of bullshit just look at the Baltic dry position now
http://investmenttools.com/futures/bdi_baltic_dry_index.htm and remember it peaked around the 11 000 mark mid 2008.
No one wants to ship anything because no one wants to by anything.