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Welcome to Earth, Mr. Recovery
Now, about
that “double dip.”
By now, even
the most bullish commentator has begun to acknowledge that the Stimulus high is
ending and we are likely entering a “double dip” recession later this year.
It is not
difficult to see why, every indicator worth anything is pointing to a massive
drop in GDP coming shortly. The ECRI, which has a 100% accuracy rate for
predicting recessions has just posted its fastest collapse in history and is
already at levels indicating another recession is a “sure thing.”
In plain
terms, the above chart indicates that we are heading into a recession that will
be on par with that which occurred in 2001… and this is unemployment already at 9.5% (if not higher) and private
sector GDP having barely staged a bounce!
The Consumer
Metrics Index (CMI), which measures spending on discretionary items and
services (and has proven a good GDP predicting tool), also points to a coming
collapse in GDP later this year. Note that the blue line (the CMI) is plunging
ahead of GDP (pink line).
There is
also the Baltic Dry index, which measures the price of shipping and as such is
a good indicator for global trade. As you can see, the Baltic has entered a
free fall. This is the sharpest Quarter over Quarter decline in history except
for 2008.
All of the
above items point to the US economy entering a NEW recession later this year.
In plain terms, the Stimulus dead cat bounce is over for GDP and we are
resuming the mega-downtrend began in late 2007.
In other
words, BUCKLE UP.
Some
investors will read these words and say, “so what? Stocks don’t need to trade
based on economic fundamentals.”
In the
short-term this is correct, market volatility and price action are largely the
result of the Fed’s loose money and easy credit policies. However, the below
chart depicting the Baltic Dry Index and the S&P 500 illustrates clearly
that those who bet against economic indicators are in for a rude awakening.
Note that
the Baltic’s collapse in 2008 and subsequent rally in 2009 lead the S&P 500
by about several month. Also, please note that the Baltic is in a free-fall
now, while the S&P 500 continues to try and push higher. This divergence
can last for a while… but not long.
The below
chart shows a close up of this divergence.
As you can
see, the Baltic Dry index peaked in November 2009 leading the stock market peak
by about five months. It then staged a collapse and subsequent bounce which
failed to re-test the previous high (just as stocks are doing now). It has
since entered a total free-fall. Based on its market leading qualities, this
spells out that stocks should collapse horribly within the next few months.
Good
Investing!
Graham
Summers
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when will the downtrend end? longer than 6 years.
http://covert2.wordpress.com
um i see the Baltic at 2773 as of 8-25...only problem with this analysis is they are using the Baltic from the beginning of the August and it has rallied huge this month...just saying.
Holy shit. Anybody have any suggestions on the what the precious metals market will do during the double dip?
Define "do". Would that be "price" or "value" for example? Can't answer your question without clarification of terms. In batting500's comment, anthropomorphizing an inanimate object is not helpful. Gold nor silver has emotions, thoughts, notions, or feelings.
My intent was not to give feelings to the Market or to Gold. My intent was to inform fellow readers on my thoughts to what gold would do. The Pseudo Allegory has been my Mneumonic to realize that Gold also has issues with market events, I thought to share it with other readers as it has been of aid to me. I do seek to add to the knowledge here.
Good Luck All...
Batting500 I understood you perfectly
So, blood in the streets would indicate a downturn for gold. Are there some historic incidents of that which come to mind?
So I looked back...trying to think of world situations that everyone knew were coming. Started with Cuban Missile Crises...not much to go on there, price of gold was being set to aprox $35.
Next I looked at Gulf War I, the bombing phase of the campaign begins Jan 17 1991, gold price drops from the previous trading session from about 400 to about 370 (it was a gap down), it had climbed for the previous 2 months.
Next I looked at gulf War II, it begins March 19, 2003. Gold on March 18 was at about $340, it drops over several trading sessions to about $322. Prior to March 18 Gold had seen a recent high of $388 on Feb 5. It did go on to higher prices later in the year. At what point did the war seem inevitable to the gold investing public? Did they bail prior to the war start? I do not know. All my numbers are approximate as I am eyeballing them on Stockcharts.com
It would be interesting to look back at other world events that were not surprise events to see how gold reacted. The premise to examine would be...During times of slow crises, how does the price of Gold act at and around the final tipping point of the crises...
Good Luck All...
I think he's trying to price it in fiat.
It hurts my head to think like that...I'm sorry, I just can't go on, I feel dirty now...LOL.
Gold loves the smell of blood in the water but hates the sight of it. (heard this from an old time trader, cannot claim it as my own) A move up until the market cracks then Gold moves down in conjunction.
Good Luck...
BDI end of 2004 and first half of 2005 fell but SPX diverged (kept going up) anyone have any thoughts to explain the divergence during that period?
Good Luck All..
2005 divergence lead to a 25P rally in SPX and BDI recovered to new highs. (Still waiting for my avatar to link, for now I'm a bag headed sheeple.)
I'm cool now, preview looked like a bag head.
Wow, a newsletter writter who has everything figured out and who is going to 'splain it all to me for free !! Jeez, thanks mr. zero hedge, that's just what I needed alrighty.
Fat finger error in the IQ number? Shouldn't that be 2 digits?
I think it's his golf score.
It's gotta be.
beam me up scottie
no signs of intelligent investment opportunities here ...
Affirmative. Phantom life signs registering from the direction of the economy, but it's not life as we know it. Pure negative energy...