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Is A Twenty Year Low On The Real (Not Nominal) S&P Approaching?
The fact that looking at market performance on a nominal basis (i.e., unadjusted for the decline in purchasing power, or the increase in hard asset prices) is foolish, has recently been understood by even some of the most garish financial tabloids. That said, Ben Bernanke could not be happier if the general public remained broadly dumb about the so-called Zimbabwe phenomenon: i.e. when the stock market goes up by a billion percent, yet purchasing power drops by a trillion. Which is why today we present a visual projection by Sean Corrigan of Diapason Securities, which looks at the S&P on a trade weighted basis, and which looks at the various market cycles not so much from a stock/PE boom-bust basis, but from the view of monetary strength of the underlying currency backing the US stock market, namely the dollar. Corrigan says: "Remember that it never does to get carried away by nominal prices, meaning one should always try to adjust for either or both of currency changes and alterations in the purchasing power of the cash in which an asset is quotes. On that first reckoning, asll you triskaidekaphobes might want to review the prospects for the S&P500, where a 50% loss of dollar-adjusted value over the next year or two, would just be neurologically exact for words." Why 50%? As the chart below shows, a 50% real retracement in stock prices is precisely where the downward channel of the lower lows of the S&P would take us. What that wouold mean is that by October 2012, the S&P will hit approximately a 20 year low. Considering all the monetary fornication that the chairman has embarked on vis-a-vis the middle class and the US currency, we will be lucky if in 2 years the market IS down just 50% adjusted for the amount of KY poured down (or as the case may be, up) the appropriate middle class orifice.
What is most interesting, as Corrigan highlights, is that over the past 10 years the standard bubble/burst cycle, adjusted for trade weighted terms, is one of 50% moves pretty much consistently. Of course as even the most introductory classes demonstrate, in the long-run a sequence of 50% up/down moves eventually tapers off to asymptote (i.e., zero).
- Tech - August 2000 +54.8%
- Gulf/WorldCom - March 2003 -46%
- SubPrime/CDO - May 2007 +49%
- Lehman/AIG - February 2009 -49.1%
- QE-China - April 2010 +45/3%
- EM/Eurozone/US Muni - 2012/2013 -50%?
And the pretty chart to go with it all:
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Not low or long enough, try downhill to 2018 - 2020, down to about 550 inflation adjusted
After the criminal Bernanke gets fired from his job because of piss poor performance, he will get a pity job with the TSA, groping little kids at the airport.
Q: If the stock market will severely punish all shorts, and then collapse and destroy all the longs, what should one do?
A: That's easy, don't be in the stock market.
The Pretty Chart would have been "prettier" (and a bit more realistic), if Mr Corrigan had chosen to display the chart in a semi-log fashion, ie the y-axis on an exponential basis... but then the chart would not have been so "dramatic"... would it now...?
[it seems like every bozo has an axe to grind... where have purity and truth gone...?]
I doubt it. I think there will be massive flight to safety into USD's, UST's, & equities not PM's.
well, at first. then ...
When the time arrives that you need PM's, you will not find them at any price...
Flight to safety, and they will flock to something that can be created out of thin air? How does that make sense?
Basically, the premise of "The US has been world reserve currency for 60 years" must be carried forward to infinity for that argument to make sense. If you reject that premise, then precious metals are clearly the way to go. They aren't the ONLY thing you should invest in, but it is something EVERYONE should have a % of their net worth in.
The Mainstream Media and Central Banks have both revealed their playbooks: Pretend & Extend (The 'pretending' comes first, IMO). The Central Bankers know they are on a collision course for hyperinflation and death of fiat currency, but as long as it approaches in a relatively orderly fashion they think they can deal with it (i.e. replace the currency with a new one when complete faith is lost in the USD, EUR, etc.)
The Media are just the Misdirection/Disinformation Arm of the Oligarchy. They take real data and then spin it, such as the story about Jobless Claims lower than expected = recovery somehow. You take 95% FACTS, but then add 5% SPIN, and voila, disinformation.
http://psychonews.site90.net
PsychoNews: Exposing the Oligarchy, one Psycho at a time.
How does that make sense?
It doesn't but don't underestimate the stupidity of the human race.
The fact that the entire world ran to the 'safety' of the worst credit of all in 2008 is testament to that.
Bingo! Whenever there is a sniff of default, the USD rallies.
PM's make sense, but the problem is todays market and HFT reaction does not.
"I think there will be massive flight to safety into USD's, UST's, & equities not PM's."
Suggestion for future tombstones...."He/she was trapped in paper when the system blew up"...."Went long paper before the conflagration"...."Portfolio was FUBAR"....
Selection limited only by one's imagination and willingness to place blame elsewhere.
And still only about 2% can see where this is going....Or, are willing to admit and commit.
I invite you to watch this video. I encourage you to learn from it. In it, provided you can apply your intellect, you can discover why the USD will remain primo, at least for your lifespan, and why PM's are just in a bubble created by the bugs.
http://www.youtube.com/watch?v=j5SoE9vBc6I
If you were really smart you'd be stockpiling your own strategic underground reserves of the black gold. The real currency of the world.
I can guarantee with certainty that gold will crash from current highs before it truly becomes relevant. I doubt it's true relevance will occur in your lifetime.
This video does absolutely nothing to support your thesis that there will not be a currency crash of the USD. Nothing whatsoever.
READ: "provided you can apply your intellect".
Fail.
This guy is a pompus blowhard with an axe to grind. Another clueless 'intellectual' that EXPLOITS idiots with gibberish
"If you were really smart you'd be stockpiling your own strategic underground reserves of the black gold. The real currency of the world."
~6-7 billion people on our planet all decide to create their own individual strategic oil reserves? Yeah, this is a plan. lol
"I can guarantee with certainty that gold will crash from current highs before it truly becomes relevant. I doubt it's true relevance will occur in your lifetime."
Only a lunatic, or one with a functioning crystal ball, would attempt to guarantee anything with certainty. Pick one.
"the USD will remain primo"
Sure it will. Dollars represent work not yet performed. Gold represents work already performed. The Fed is printing dollars like crazy. No one is printing gold. Which do you think is the rarer asset?
Your logic not only escapes me, it escapes you as well. I think your crystal ball needs a tune up.
Demographically, USA is just like Japan was a generation ago: kids not being hatched fast enough to replace their parents (unless you count the nonproductive class). But new dollars are being spawned fast enough to make up the difference in nominal terms.
I don't mean to be overly snarky. But in my book people with PhDs & MBAs are the non productive classes. And if they are too busy spending their taxpayer funded bonuses to make time to procreate, then in hindsight, it might have been worth it for the taxpayers.
On the other end of the spectrum, the subsidy is set up to promote equally messed up family structures and educations.
:D
How about a BSME?
MEs are the worst type of engineers around. But any engineer is orders of magnitude better than any other BS.
Thats why china is kicking our butts.
Yes I was always a closet business major.
I really just wanna be like Wanger and leverage the labor of 10 or 20 minions to make my $$
I wont hold it against you. If engineers did not have some business background they'd be fruity scientists. But back to the inferiority of MEs.... EEs design computers that can create trillions of dollars in less than 1 second. MEs fastestest printing presses can only spit out a few millions per second.
I'm not a real ME, just a composites process problem solver / management pet.
If you want to know how to cure a 787 wing skin in an autoclave, or get the workers to lay it up / bag it correctly, I'll have an opinion to share with you.
Have you considered using your skills to help the Bernank? He's already got the copters, he just does not have enough physical bills. Which is why we get all this rancid alphabet soup. QE1, QE2, POMO, etc.
I am thinking you and your boys could design a composite printing plate that can operate at hypersonic speeds. Inkjets and laser printers are just too slow.
I am honestly at the point of wishing he would actually dump money out of helicopters.
We built Blackhawk parts at my last job. :)
Nice Bird! But we need you again son. In a new role. We need plates that can print enough to fill those and the big windy's with Benjamins.
"If you want to know how to cure a 787 wing skin in an autoclave, or get the workers to lay it up / bag it correctly, I'll have an opinion to share with you. "
I know how to test 8" wafers with 5000 die in less than 5 minutes, without ESD blowout, will that do? :)
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I know how to field strip and clean my AK-47. Reassembling it has proven harder though...
Meh. You folks are all wankers. I can turn lead into gold.
you... are you the real jesse james?
Turning bytes and paper into gold is far more lucrative than your old classic tricks.
No need to tear an AK-47 down, they were built to run forever with no need to clean. Spray some Gunblast down the barrel, stick a cleaning patch on the cleaning rod, a couple of passes through the barrel and you are done. With an AK the trade off is accuracy for reliability.
However, it is good to know how to take it apart and put it back together. So here you go: http://www.youtube.com/watch?v=OlsFwuA3-JY&NR=1&feature=fvwp
Nice vid!
An engineer has a BS. A Bachelor of Science in Engineering. Or are you you talking a BS that comes from a bulls bottom?
4 junks? I thought this was fight club? and making fun of others overinflated credentials, especially economic based ones in current times is alot less abrasive than some of the race, national pride, and religion baiting . I guess I need to read the manifesto again.
Fuck everybody's race, religion, and nation!!!!!!1
Brave of you. I don't like PMs as a currency. Fiat is marginally better as long as it is not managed by people who admit that they create one asset bubble after another, based on fads. Scorpion and the frog.
yes indeedy. that's the problem. keynes explained how to use the monetary and fiscal powers of the modern nation state to ameliorate the business cycle and the wankers in charge used the knowledge as an excuse and pr to spend like drunks during the long inflationary cycle dating from 1932-1942 (particularly after 1964) and then like drunks to the drunk power in the prosperity first part of the deflation starting in 1980-82. so now: no reserves and all this talk of austerity as national and international policy for the second (famine) part of the deflationary cycle. whoopee.
blaming keynes for this fiasco is like blaming einstein for truman's atomic bombing of japan. they both may have "written letters" to the policy makers explaining how to use their theories but the implementations were the policy makers' choices.
p.s. does the graph in the post use the bis's neer (nominal exchange rate) index? if the point is adjustment for fiat mirage wouldn't the reer (come on punsters) (general price level/inflation adjusted currency change index) be better? the price change from 1965 to 1982 doesn't look like the 85% decline cpi adjusted (forget currency change) real u.s. equity return that occurred, but the graph is hard to read at those low levels; i.c.b.w.
Do you know what you get when you mix equal part of gasoline and frozen orange juice?
"Explosives. Lots of common household products can be used to make explosives." Lots of quotes from that movie are great.
But please don't blow up my apartment 'cause I made fun of econ PhDs during a deep recession. I don't have a local high-end market to sell soap in for groceries.
I agree with you 100%. I can't explain the junks. I wouldn't trust the Bernank to check the inflation of my tires, and these MBAs are the guys who petition the government to import software engineers from India (because there's no qualified Americans). The fact that they can pay them far less than US engineers and that their presence drives down everyones wages has nothing to do with it.....
If Minion isn't hip to this game yet, he will be soon. Every smart young techie should read and understand why Joe Stark crashed a plane into an IRS building:
http://www.nytimes.com/2010/02/19/us/19tax.html?_r=1
I've been wondering when I'll be looking for work outside the USA. Right now I'm in Utah for an interview with a co. that makes the composite materials themselves (something USA is still somewhat competitive in). The hiring manager told me they've been consolidating some of their California plants to the Utah facility, for probably the same reason you can pay an engineer less if he's from India - environmental restrictions, taxes, cost of living are all less. The parasitic class (both govt. bureaucrats and those on the dole) have taken over the golden state.
"Little boxes filled with Doctors, and Lawyers, and Business Executives"
http://www.youtube.com/watch?v=2_2lGkEU4Xs
Main musical theme of Weeds. Good show!
Nicely done. But guessing the proximate cause(s) is a mug's game. My obvious two choices are collapse of BofA/Citigroup and an ordinary recession despite ZIRP (shades of Japan); obviously those causes are related. A panic in muni-land of course would follow.
check out the chart for pimco's california muni products (e.g. pck -- thanks john hussman). such a panic may be preceding.
Double post
You lost me. We could have a double top in the spx if 1200 doesn't hold here. Monthly RSI is right at break out. Bens getting his way
None of this crap makes any sense, and I'm so tired of people taking seriously SP in silver, SP in gold.
I'm starting a new index SP in Nat. Gas; at least nat gas is useful in real life.
What's the common denominator for valuing all of these assets? Ah, yes, the Almighty Dollar.
And don't think for second that the supposed gold at our supposed depositories is not ultimately behind that perceived value of the dollar. Anyone think that the dollar would not have fallen long ago if the world thought the U. S. had only 2 ounces of gold in its vaults?
No, I really don't. I think our forefathers "earned" reserve status on the beaches of Normandy and Iwo Jima. The 20th century was the rise of American Imperialism and the question now is whether the New York/Washington power complex can maintain it.Our "true" reserve status lasted until our oil production peaked; think about that.
Trav,
you are an abrasive curmudgeon but you are one of the few here that understands oil and the dollar.....
Hell I am even starting to empathize with you when it comes to dealing with the morons....
I like to concatenate supposed depositaries to suppositories.
Gold is non-dilutable currency. Measuring an asset price in a fiat currency is like trying to use a stick of warm butter as a ruler.
an icicle?
I'm a closet natural gas guy too. Buy it before it gets expensive (actually the equities).
You get a similar result when the S&P 500 is priced in gold (except the fall is even more pronounced).
http://www.planbeconomics.com/2010/11/08/gold-7800-or-sp-220-take-your-pick/
who cares? I'm watching Trash, Inc. and seeing how NYC is burning fuel in trucks to haul garbage fucking 400mi to dump somewhere. LOL; what kind of sick society is this???
I mean talk about a precarious position; what happens to these cities if there is any oil scarcity? Dump it in the river? I suppose there's always New Jersey, right?
Yea really, they should be hauling that trash on an electric high speed train! Sheesh, dont these clowns know anything? Duh!
If the current stock market and gold market strength is saying anything....
Then both stocks and gold could be headed much higher.
The question is this:
Does gold go up 3x - 5x faster than stocks?
Or will stocks go up 3x - 5x faster than bullion?
I guess it will all depend upon the F12 punching mo-mo monkeys, which item can be bought on margin the quickest?
The choice is to front run OPEC (gold) or POMO (paper). Opec wants gold at the cheapest price for accumulation purposes, Ben wants equities at the highest possible price for the wealth effect.
It all comes down to the size of the helicopter. I gave up trying to predict the outcome. It's like betting on horses.
I think you're asking the right questions, but to me the ultimate outcome is obvious because so much of the money flowing into stocks is going to companies that have already failed by any reasonable measure. If we were willing to let the zombies die, it would be a tougher race to call, but we're doing all this to keep them alive and everyone knows that, so it seems obvious to me that gold should continue to be the better performer.
Even those monkeys have got to be losing faith in the dollar's future.
very well put. nice to hear a touch of fundamentals in all the technical and fund flow analyses.
meanwhile we, the public are left hanging on the wind of hope.
i wish all crooked bankers a long and horrible life. May their peckers shrivel and all their food taste like crap.
I see they conveniently forgot to draw the line connecting the 1999 and 2007 peaks because that just might mean there's still major upside.
No, the main takeaway is that the boom and bust cycles, since Greenspan's bubblenomic policy entered terminal failure stage, are running at a 50% pace. It just so happens that the market has rallied - in relative terms - nearly 50% from the trough of the previous 50% - again, relative - decline.
However the end-result of The Bernank regime may look much different than that of Greedspan. POMOtions for everyone!
Now why you gawn and make Harry angry?
Can you trade the "real" S&P ?
damn good idea. putting the stock market with many conventional techniques yields little in an inflationary environment (viz 1965-1982: real -85%, nominal 0% to -15%).
In nominal Zim Dollars investors in the Zimbabwe stock market made tons of money during hyperinflation....literally, tons of money.
The tons of Zim Dollars would purchase how much PMs? How much food? How much of anything?
I laugh when I hear that one cannot eat PMs. Goats can survive on a diet of paper....how about people?
An ounce of silver for a set of tires...
High speed printing presses are not needed. Perhaps past U.S. Dollar denomination bills are coming back?....As Jimi Hendrix noted, 'A Six Can Be A Nine'....And, how ironic is it that Woodrow Wilson's face was on the $100,000 bill?
"The high-denomination bills were issued in a small size in 1929, along with the $1 through $100 denominations. The designs were as follows:
From Wiki.... http://en.wikipedia.org/wiki/Large_denominations_of_United_States_currency
NEVER underestimate the replacement power of equities within an inflationary spiral. Been preaching this since the meltdown.
Problem right now is that while Benny & Co are printing, the Yellow Horde are tightening. Who rules?
Whose monetary policy will hold sway? U.S. or China?
I say the East Shall Carry the Day.
Sell commodities and stocks until Bejing quits tightening.
PPT fighting the Chinese CB will be a no-contest.
NEVER underestimate the replacement power of equities within an inflationary spiral. Been preaching this since the meltdown.
Problem right now is that while Benny & Co are printing, the Yellow Horde are tightening. Who rules?
Whose monetary policy will hold sway? U.S. or China?
I say the East Shall Carry the Day.
Sell commodities and stocks until Bejing quits tightening.
PPT fighting the Chinese CB will be a no-contest.
If only Bobby "The Moron" Prechter knew that the correct way to short stocks is to be long Gold, he would be playing in millions, if not billions, instead of selling shitty subscriptions of Elliot Wave (whatever the hell that is) newsletters in order to survive. The "tidal wave" he talked about is happening - not in a crashing stock market, but in the price of Gold - as it should.
I concur re prechter... but how about be long both as a way to short the USD. You don't believe in fiat so just be long whatever it denominates and enjoy the free ride up.
NB: Please see what happened to oil in 2008.
There's a simpler way to do this:
http://www.ritholtz.com/blog/2010/05/spx-priced-in-gold/
Note gold had its ten years of fame
Bubble - what bubble?