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Why This is Not 2008
Much of the investment community is now bracing for a repeat of the 2008 crash, when the S&P 500 plunged by a gut punching 52%. For proof, look no further than last week’s dramatic selling, when traders could not unload equities fast enough.
Unfortunately for those puking out positions here, this is anything but a replay of the melt down from three years ago. Much like the military, they are over preparing for the last battle, and blind to the one ahead of them. Let me tell you why those capitulating now, have got it all wrong:
*In 2008, banks were essentially insolvent. Since then, they have raised over $50 billion in primary capital.
* Nonfinancial companies are sitting on the highest cash mountains since 1955, some $2 trillion, or 11% of total assets.
*In the last three years, the consumer savings rate has leapt from 1% to 5.4%.
*Public interest coverage is at a ten year high.
*Business inventories have gone from bloated to fighting lean.
*Debt/GDP has fallen from 100% to 90%.
*The cheap dollar is fueling surging exports.
*Short term interest rates have fallen from 3% to 0%, and will remain there for two years.
*Junk bond yields have plunged from 25% to 8%, opening up financing avenues for many subprime corporate borrowers.
*Companies have announced buyback programs of $550 billion, and some $450 billion of this may be executed.
If you were an automaton, and only saw these numbers, you would be loading the boat with equities right here. But you’re not, and are probably still nursing scars from 2008 which only recently healed, and still need to be scratched whenever there is a sharp change in the weather. One can never underestimate emotion when it comes to stock market valuations.
My late friends, who traded the 1929 crash and continued on throughout the thirties, told me the experience was so traumatic, that many customers stayed out of the stock market for decades, if not for the rest of their lives. We may be seeing a repeat of that now.
The bottom line here is that while the market is overdue of a nice 5%-10% correction, we aren’t going to crash. We’re not going to zero, to 666 in the S&P 500, or even below 1,000. For that you’ll have to wait until next year, or 2013 at the latest.
For these who wish to participate in Macro Millionaire, my highly innovative and successful trade mentoring program, please email John Thomas directly at madhedgefundtrader@yahoo.com . Please put “Macro Millionaire” in the subject line, as we are getting buried in emails.
To see the data, charts, and graphs that support this research piece, as well as more iconoclastic and out-of-consensus analysis, please visit me at www.madhedgefundtrader.com . There, you will find the conventional wisdom mercilessly flailed and tortured daily, and my last two years of research reports available for free. You can also listen to me on Hedge Fund Radio by clicking on “This Week on Hedge Fund Radio” in the upper right corner of my home page.
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I think the term "Mad" in "MadHedgeFundTrader" is too vague.
To be more specific, might it be better to rename to "UtterlyFuckingDelusionalHedgeFundTrader"?
LMFAO
what a douche
WTF!?
THIS is from yesterday (9/1) titled" "why I'm Flipping to the Short Side":
http://www.madhedgefundtrader.com/september-1-2011.html
This guy is SHAMELESS........writes pieces to cover ALL scenarios, so that he can later write "See, I told you so"!
Surging exports? Down 30% from 2008.
Exactly. EARNINGS are about to get crushed across the board.
Eat a dick bitch.
"We’re not going to zero, to 666 in the S&P 500, or even below 1,000. For that you’ll have to wait until next year"
Ha! Have to wait until next year for 666??? So buy now right???
Last time I checked, next year was 4 months away so buy now when we are going lower next year???
How shortsighted is that!
Bullshit!
Remember, the optimist on the stern of the Titannic was heard to say: "Things are getting better. We're getting higher and higher above the water."
ironic... history repeats itself... the Titanic was an insurance scam pulled off in part by JP Morgan himself. It was actually the damaged sister ship, the Olympic which was deliberatly run into an iceberg. see "Titanic, the Ship that Never Sank".... great youtube video on the subject.
You're a disgusting piece of shit MHFT. Go suck a dick! Yes?
A lack of liquidity, say triggering CDS, will cause all assets to plummet due to forced-selling. Hardly any have blown up - yet. Give it time, there's a bunch out there and their holders are salivating at the opportunity to pull the trigger on these weapons. Sitting tight until there's more clarity on the Eurozone.
With the dollar getting crushed on a daily basis, my carry trades have been paying big. Sure MHFT, all the same I take the opposite side of your trades, thanks.
*In 2008, banks were essentially insolvent. Since then, they have raised over $50 billion in primary capital.
- $50 billion is nothing, they are still insolvent, market to market and the all go under
* Nonfinancial companies are sitting on the highest cash mountains since 1955, some $2 trillion, or 11% of total assets.
-- A lot of the "cash" is debt, just borrowed at super low rate, its being held for suvrival
*In the last three years, the consumer savings rate has leapt from 1% to 5.4%.
-- Need to be over 10% for actual debt paydown and capital formation
*Public interest coverage is at a ten year high.
-- No comment
*Business inventories have gone from bloated to fighting lean.
- It can always go lower
*Debt/GDP has fallen from 100% to 90%.
*The cheap dollar is fueling surging exports.
-- I bet the dollar will rally soon, but falling dollar kills US consumers (call it a wash)
*Short term interest rates have fallen from 3% to 0%, and will remain there for two years.
-- This kills anyone over 55 who need low risk investment, just killing granny w/ ZIRP, and it has not help employment one bit.
*Junk bond yields have plunged from 25% to 8%, opening up financing avenues for many subprime corporate borrowers.
- Take profits here
*Companies have announced buyback programs of $550 billion, and some $450 billion of this may be executed.
-- Buyback have a terriable success rate, they often end up bidding up their own price only for it to go much lower later.
Take another hit on yer crack pipe you fuckin moron. Jesus Christ! How much are THEY paying you?
Smokin' crack or sniffin' crack. MHFT is slip sliding away...
So eloquently put!
I remember this post on your web page and bookmarked it .... still read it from time to time to ask ...how can you post this .... but reading both sides of the argurment is OK with me...
http://www.madhedgefundtrader.com/may-3-2011.html
quote .." Precious Metals. (GLD), (SLV) If oil is wearing a toe tag, will gold be far behind? Coming deflation will cut the inflationistas off at the knees. A strong dollar sends those looking for alternatives into the Looney Bin. Take these frills away, and the barbarous relic becomes just a heavy rock that will take it from $1,550 an ounce, down to $250-$400. Gold bugs are about to get doused with insecticide. As for silver? How about a move from $50 to $4-$8? "
Bullshit. SP 450 enroute.
I't a lot easier to to save $$ when you're not paying that big monthly mortgage bill and living rent free....best thing the banks ever did for folk...
MORON PLEASE GO AWAY..
LEO WAS ENOUGH ..
ALX
MHFT once again does not disappoint with his trade to fade
Here's the title of my reply to MHFT: "Why I Still Don't Give a Rat's Ass About What You Think"
Now I know why your name starts with MAD!
Wow, MHT, so much to comment on here.
I agree that the manipulation and volatility of this market has scared away mom and pop, in many cases forever.
I agree that it may take a year or two for the market to bottom
I cannot agree that things are better than they were in 2008. Non financial companies ruthlessly downsizing inventories and staff, while raising capital is not occuring in anticipation of business booming. In short, after doing all they can to survive, they are out of tricks. Either the economy turns up or they go under.
Financial companies, despite a HUGE infusion of our tax dollars, are much worse off than they were in 2008. The shadow inventory is bigger than ever, and the quality of that inventory is being depreciated each year these homes stay empty, or are occupied by people with no incentive to care for them.
The fraudulent loan issue is exploding.
The soverign nations of the West are bankrupt. The central banks are running out of manuevering room. Ben Bernanke is waiving around a pistol with only one bullet in it. Will he fire off QE3 or not? Damned if he does, damned if he doesn't.
Contrary to popular opinion, zero interest rates are not a good sign for the economy. The Fed can't raise rates or the USG won't be able to service the debt. In fact, it can't do so now and is subsisting on monetizing of debt.
You are probably right, the Fed can probably keep all the balls in the air for a lot longer than we think, but most of the bullish metrics you cite above are just that, full of bull.
The debt/GDP has fallen? Really? Does anyone even know what the GDP is. I have ZERO faith in these numbers. Our GDP is negative and we are spending more, not less. How much debt isn't reflected in these numbers and how much is off balance sheet?
With no jobs and $4 gas, consumer savings rates are higher? That isn't a credible statement.
Companies with more cash? Of course, they are scared and fighting for their lives.
Exports? All fiat currencies are racing to the bottom. This is not a positve sign.
OK, I'll say it. GOLD. Gold is the pulse of the economy. If gold acts up, it signals problems ahead. Central bankers depend upon the credibility of their fiat. The truth of our current predicament is that nobody with any brains has any confidence in the dollar, our leadership, this economy, or the markets.
If you are saying the big sell off might take longer than we think, I agree that is possible.
If you say the economy will recover without that sell off, GOLD says you are wrong.
Total debt/GDP is north of 350%. An all-time record.
Bernanke and his QEx intends to turn those mountains of corporate cash into sawdust.
While he is doing that QEx also proposes to raise the cost of living for every penniless dick in the country.
Yeah right, if you say so.
MHFT says:
The cheap dollar is fueling surging exports.
The latest ISM report says:
http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2011...
Somebody needs to give this MHFT dude a subscription to ZH.
Maybe it's really Leo in disguise?
Mad HFT, are you EFFING NUTS?
"The bottom line here is that while the market is overdue of a nice 5%-10% correction, we aren’t going to crash. We’re not going to zero, to 666 in the S&P 500, or even below 1,000. For that you’ll have to wait until next year, or 2013 at the latest."
Way to talk out of both sides of your 2 faces.