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Three Charts Every Stock Investor Should See

Phoenix Capital Research's picture





 

 

The market continues to track the same pattern it performed going into the failed debt ceiling talks of July 2011. As you’ll recall, then as is the case now, US politicians failed to reach a credible solution to the US’s debt problems. What followed was a credit rating downgrade and a market collapse:

 

Here’s the S&P 500’s recent action:

 

 

Here’s the S&P 500’s action going into the failed debt ceiling talks of 2011:

 

 

Here’s what followed:

 

 

Be forewarned. As noted earlier this week there are no political incentives for the GOP or Democrats to propose a real solution to the fiscal cliff. So it is highly likely

we will be going over the cliff.

 

Another item holding up the market is hype and hope of more QE from the Federal Reserve at its December 10-11 meeting. I have to admit, I find this proposal completely baffling. Macroeconomics 101 dictates that it takes a full six months or more before a change in monetary policy by the Fed will be fully digested by the system. The Fed just announced a new program three months ago. So the academics at the Fed aren’t even drinking their own Kool-Aid anymore.

 

Since the Great Crisis began, the Fed has on average funneled some $40+billion per month into the system (even when no official program was in place the Fed was still juicing the markets this much, typically during options expiration weeks).

 

QE 3, which may as well be called QE infinite because it is open ended (will never end), combined with the Fed’s Operation Twist 2 program has the Fed currently putting $85 billion into the system every month. On an annualized basis this is over $1 trillion. This means that at this pace, by the end of 2013 the Fed’s balance sheet would be $4 trillion. The entire US banking system is $13 trillion.

 

And somehow pumping more money would work?

 

At some point some group in the political class needs to actually ask the Fed the following: “You’ve had four years of implementing any policy you like without political consequence. Four years. During that time you’ve spent well over $2 trillion.  And the Crisis has not been fixed. Why on earth should we give you more time or money?”

 

I believe this will happen in 2013. As the US economy takes a nose-dive and the Sovereign Crisis moves into hyperdrive, the triumvirate of the financial system (the Fed, Wall Street, and Washington DC) will begin to increasingly point fingers at one another to divert blame for the fact that we’ve spent trillions of Dollars and things haven’t really improved.

 

This process has already begun with the Fed firing the first shots: it has sued Goldman Sachs while Bernanke has told Congress that it’s their fault the US is so indebted and facing fiscal ruin.

 

This process will accelerate next year. At that point I expect Congress and Wall Street to enter the fray more aggressively targeting the Fed. And that’s when things could get very ugly.

 

Swing by www.gainspainscapital.com for more market commentary, investment ideas, and special reports outlining specific risks and opportunities in the capital markets.

 

Graham Summers

 

 

 

 


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Sat, 12/08/2012 - 15:26 | Link to Comment The Reich
The Reich's picture

Best 

Three Charts

 

I've ever seen !!!

 

 

Sat, 12/08/2012 - 16:22 | Link to Comment vast-dom
vast-dom's picture

it's actually one chart cut up into three -- a special 1 for 3 offer in disguise by the grand fucktard of ZH! all that's left is for Graham to post pics of his merry Leprechauns eating Clueless Horseman's turkey!!!!

 

 

Sat, 12/08/2012 - 14:36 | Link to Comment orangegeek
orangegeek's picture

It's a process folks.  Asia and Europe topped in 2010 and 2011.

 

Every possible move is being made to keep the US markets up, but the momentum is fading.  A turn down in the US markets in 2010 and 2011 was countered to new highs each time.

 

SP500 weekly shows a "bigger picture" and puts into perspective how devasting the next crash will be.

 

http://bullandbearmash.com/chart/sp500-weekly-finishes-marginally/

Sat, 12/08/2012 - 05:59 | Link to Comment Supernova Born
Supernova Born's picture

Rating 3, with a total of 6 votes?

This "change the channel to finish the show" is a loser for ZH.

Sat, 12/08/2012 - 13:19 | Link to Comment PD Quig
PD Quig's picture

"Why on earth should we give you more time or money?”

Umm, because if the Fed doesn't keep pumping, DC can't keep borrowing 47% of every dollar the federal government spends? No friggin' politician is going to demand the Fed explain their policies: they all know that it is the only way the game continues...until it blows up.

Which is exactly why the dumbassed GOP ought to give the Dumocrats and Obama everything they ask for. It would be worth it just to see them trip over their shit-filled pants as they backed away from responsibility. But after all their shit-for-brains talk of "tax cuts for the rich" for ten fucking years, it would be priceless to hear them explain why those tax cuts lapsing would be such a bad thing. The GOP is probably too stupid to do it, but they could easily hand Obama and Reid a hand grenade and pull the pin. THAT would be the best entertainment coming out of D.C. since the 1983 Redskins.

 

Sat, 12/08/2012 - 01:18 | Link to Comment Augustus
Augustus's picture

I once was certain that going off the Cliff was insanity.  Then I looked at all of the problems it would help to cure.

Tax Rates increased for EVERY TAXPAYER.  Lowers the threshold at which taxes are payable.  All of that leads to a broadening of the tax base.  No more escaping contributions for FICA.  Make sure the people know that they have to Pay to Save It.

The Democrats have continually claimed that the deficit resulted from tax reductions without spending cuts.  So, when they want to reduce rates, the can show everyone how to do it correctly.

Then the debt ceiling talks can get serious.

Sat, 12/08/2012 - 00:20 | Link to Comment GonzothePatriot
GonzothePatriot's picture

The only way TO balance the budget IS to go over the cliff. Until the debt goes away through default (because it will not be paid off), the can will continue to be kicked against the wall at the dead end street, with no happy ending. In the mean time, keep on stacking!!

Fri, 12/07/2012 - 23:51 | Link to Comment lasvegaspersona
lasvegaspersona's picture

QE is to fund the government. Anyone who believes that 'helping the economy', 'lowering unemployment' or anything else is not paying attention. The FEd has all the paper it needs.

The US government was supported by China in the past. China would return the cash it collected to the USG and get treasuries. This funded the government through borrowing. Now that source is gone but the spending CANNOT stop...what would happen to the GNP??? if it did? So now the FED must fund the USG (mometizing the debt) as the play enters the last Act and the curtain closes on the dollar era.

Hold gold or at least something real, a lot of paper is about to fail.

Fri, 12/07/2012 - 23:32 | Link to Comment Notarocketscientist
Notarocketscientist's picture

I thought Europe was going to collapse in ther summer graham.   Oh you mean next summer?

Sat, 12/08/2012 - 03:02 | Link to Comment PGR88
PGR88's picture

I don't give a shit what negative spin Zerohedge gives us - many stock markets, are nearing record highs.  Just look at the charts and price action.  Even in Europe, which is supposedly collapsing, DAX is near record highs, and CAX is coming off medium term lows.  Asia, ex Japan, are pretty much all near record highs.   

Whether real or fake, world central bank money printing is finally going to blow the lid off stock prices in the next 6 months.  There is still a lot of room to run

Sat, 12/08/2012 - 04:18 | Link to Comment Tinky
Tinky's picture

"There is still a lot of room to run"

This is precisely what every lemming in history has believed.

Sat, 12/08/2012 - 03:37 | Link to Comment algol_dog
algol_dog's picture

That kind of speak will get you kicked out of the club Sir.

Repent and beg forgiveness now ... Or else ~

Sat, 12/08/2012 - 03:02 | Link to Comment PGR88
PGR88's picture

I don't give a shit what negative spin Zerohedge gives us - many stock markets, are nearing record highs.  Just look at the charts and price action.  Even in Europe, which is supposedly collapsing, DAX is near record highs, and CAX is coming off medium term lows.  Asia, ex Japan, are pretty much all near record highs.   

Whether real or fake, world central bank money printing is finally going to blow the lid off stock prices in the next 6 months.  There is still a lot of room to run

Sat, 12/08/2012 - 12:53 | Link to Comment Fuh Querada
Fuh Querada's picture

There is the camp that says stocks will go for the moon at the latest when there is a flight out of Treasurys.

Then there is the camp that says stocks are overvalued because P/Es are well above 10 year averages (supposedly more reliable than trailing or leading P/Es), and that the Dow/Gold ratio is heading to 1:1.

Apart from the fact that most stock indices have never exceeded their 2001-2 highs, if you plot most of them as measured in ounces of gold rather than in currencies, then the charts are diving.

Take your pick.

Sat, 12/08/2012 - 09:01 | Link to Comment myptofvu
myptofvu's picture

"There is still a lot of room to run".. Isn't that what's usually said right before the crash?

Fri, 12/07/2012 - 23:29 | Link to Comment aerofan3
aerofan3's picture

1st January 2013, the 'Fiscal Cliff' will cause taxes to rise - pleasing the Democrats.

It will also cause cuts in expenditure - pleasing the Republicans.

Just the population will suffer while the two parties blame each other and carry on as before.

But the really important thing is GAY MARRIAGE, takes everyones attention away from reality! 

Fri, 12/07/2012 - 21:27 | Link to Comment LongSoupLine
LongSoupLine's picture

"Stock Investor"...lol.

Fri, 12/07/2012 - 20:26 | Link to Comment beastie
beastie's picture

fuck off graham

Sat, 12/08/2012 - 12:48 | Link to Comment Fuh Querada
Fuh Querada's picture

Succinctly put. Why not indeed.

Fri, 12/07/2012 - 20:19 | Link to Comment uncle_vito
uncle_vito's picture

These charts need to be tossed.   If the market has taught you anything is that patterns never repeat.

Sat, 12/08/2012 - 14:35 | Link to Comment pebblewriter
pebblewriter's picture

I assume you mean that in jest.  If the markets have taught me anything, it's that patterns almost always repeat.

 

https://pebblewriter.com/learn/analogs/

Fri, 12/07/2012 - 20:13 | Link to Comment GOSPLAN HERO
GOSPLAN HERO's picture

silver!

Fri, 12/07/2012 - 19:43 | Link to Comment dumpster
dumpster's picture

phoenix more useless noise from your camp.

does lots of crap equal more suckers to sign up for useless information at a cost ..

Sat, 12/08/2012 - 13:02 | Link to Comment AmCockerSpaniel
AmCockerSpaniel's picture

>>>> Macroeconomics 101 dictates that it takes a full six months or more before a change in monetary policy by the Fed will be fully digested by the system. <<<<  The key word here is "fully". We don't have, so why should we wait a "full" six months before saying it's taking too long to start working, and we should start doing more now. The one tenth of one percent owns the government. Never forget that. Have you heard any politician bad talk Free Trade? Was the country in trouble, and needed change like free trade? Now the new CEO of Apple is saying that the jobs can never come back in our life time. The technological know how is lost in America. Even if we brought back the factory equipment, now one know how the operate it. China can now bring the US to it'd knees by just stopping to sell to us. Most of the telecommunications equipment is made by then, as is the rest of the high tech stuff like medical equipment. It happened because of unchecked greed. The supreme court ruled a corporation is the same as a human, and can spend as much of its money it wants to buy the government.  Do you really think your vote matters? You only had two choices(supreme court again), and both are taking money from the supper packs (there is no such thing as free) so they answer not to the people, but the one tenth of one percent. They have built an enigma.

Fri, 12/07/2012 - 22:26 | Link to Comment max2205
max2205's picture

What exactly is this guy selling?

Sat, 12/08/2012 - 12:42 | Link to Comment Fuh Querada
Fuh Querada's picture

The financial equivalent of wooden assholes for rocking horses.

Sat, 12/08/2012 - 03:42 | Link to Comment algol_dog
algol_dog's picture

Markers to draw squiggly lines ... 5 for a $1.00

Fri, 12/07/2012 - 19:12 | Link to Comment whotookmyalias
whotookmyalias's picture

I've been waiting for the correction so I can trade it.  More paper money equals more PMs.

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