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Message from Top Managers: “Prepare for Turmoil”
It is slow season in the media and things have significantly calmed down on the financial markets as well. It is so quiet you could hear a pin drop, which is tremendously frustrating, because a market without direction is the last thing an investor wants. Investors are being lulled to sleep and in practice that usually leads to unpleasant surprises once tension returns to the markets. We are, moreover, in a sort of transition phase for the large group of retail investors who are getting sick and tired of the fear of a market correction; year after year they waited for a correction worthy of mention which should have followed in the aftermath of 2008. Even more, the most important market indices are at their highest levels… ever!
Investors are suffering from ‘crash fatigue’. They no longer fear a new market correction, because ‘it is not going to happen anyway’. Although their timing and attitude might be questionable - the current bull market has been going strong for more than 5 years - they are happily participating in the stock market. The fact that investors would pick this moment for a large scale change in sentiment is worrisome in our opinion, however. You know as well as we do that everyone is positive at the top of the bull market and, although we would not say that every investor is all-in at the moment, we are getting dangerously close to a consensus.
That is also the opinion of former Fed Chairman, Alan Greenspan. This man is responsible for the expansive monetary policy of the ‘90s, which was at the base of the hefty market correction around the turn of the century. Greenspan knows what he is talking about. In a recent interview with Bloomberg he pointed out that the surge in the stock market will inevitably lead to a strong correction, even more so because the equity risk premium (versus bonds) is not attractive enough. He did going into specifics about the possible timing of this correction, however.
More and more of the world’s top (hedge) fund managers are joining in. It will probably not be a surprise to you that the most critical investors, like Marc Faber, have been underlining this for a while already. It is much more interesting, however, to look at investors who felt positive until recently, among which is Jeffrey Gundlach. The ‘Bond King’ has clearly changed his mind about the markets and he is also one of the best market timers in the financial world. Gundlach has become increasingly cautious about stocks in particular and he feels that the stock market is generously valued in this economic climate. He foresees profits declining in the near future, which does not bode well for share prices. Gundlach also noticed that the masses are increasingly invested in the stock market; never before have investors taken on so much debt in order to buy stocks on the NYSE.
Source chart: Dshort.com
This is also an indicator that seems to have hit its ceiling. When ‘margin debt’ declines, you can expect a strong correction; another great point from Gundlach. However, talking the talk does not equate to walking the walk. That is something we do not see yet in his case. Especially not with regards to stocks. He is taking up a position indirectly by doubling down on a further increase in bond prices, however, which is obviously the area where the Bond King feels best.
A reknowned investor that did take action recently is George Soros. As a speculator, Soros became (in)famous for betting against the British Pound. The fall of the currency turned him into a billionaire and gave him premier status as a speculator. Over the last few years, George Soros was mostly enjoying the rise of the stock market and dabbled a little bit into commodities or commodity related segments (such as gold mining stocks). In his latest fund report it became clear, however, that Soros is increasingly protecting his capital from a future market correction (through put options on the S&P 500). He increased his short position on the S&P 500 index from 299 million USD to 2.2 billion USD, which is an increase of more than 600%. The size of the position within Soros’ total fund was raised from 2.96% to almost 17%! Of course, we have to add that the rest of the billionaire’s portfolio remains strongly invested in stocks. The purpose of this position is to hedge his current positions against a potential (and temporary) bad stretch on the market.
George Soros does have remarkable timing. Do not forget that the S&P 500 recently crossed the 2,000 points level, which was also our 2014 target for the index since the end of last year. From our point of view, there are 2 possible scenarios now. Either the rally pushes on and transforms into a true melt-up as a result of mass buying (from short covering) or the rally dies down and turns into a a swift correction. The former breakout level between 1,500 to 1,600 points would be the next station if that happens. If you read our prognosis for the year you already know the answer: we are cautiously sticking to our favorites and are watching over our comfortable cash position.
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My knowledge of finance is basic at best but it interests me, some months ago I came across a web site, http://armstrongeconomics.co/armstrong_economics_blog/
and as far as I can understand it (basic at best remember) it seems to be the one to follow. Lots of free stuff but to get the nitty gritty it seems you have to use the pay service. Again, as I understand it, said Martin armstrong, is consulted by Governments from all over the world. Maybe some of the finance guru's out there can make use of this information and give us 'basic' chaps a hint or two. I follow ZH of course as well.
As an aside, can some one tell me why my spell checker, which is turned on, does not work. I have Win7 Premium.
I have tried Googling, but to no avail. Thanks.
You are not alone - spell check not working on W8.
So, two possible scenarios. We melt up from here, or correct. Thanks for that.
It never changes; every newsletter ever written has the same game plan; it'll go up--it'll go down' and then whatever happens---"see, we were right". And yet idiots subscribe to this hollow noise every year.
follow Soros, he will lead you wherever he needs you to be all you independent thinkers. LMAO
He's very good at "herding the sheep" to be sheared.
Your chart paints a horrible picture-- if the market were to behave predictably, then we are looking at a two year period in which three decades of real growth will be erased. Great. But if everyone knows this and shorts the market-- is it possible that the crash will never occur? I sense we are entering into a new phase of the crisis-- I am now starting to receive pre-approval credit-card offers saying that it is because of my outstanding credit history-- but I was just ready to file bankruptcy to wipe out my debt and start over. I am not proud of it but this is a fact-- it seems the market timings are always wrong.
Common sense says "Short The Market", but the market says "Buy The Market", but eventually someone is gonna be stuck holding the bag like the game where chairs disappear and the people needing a chair do not. I have a fundamental question related to short-selling and/or put options. I was led to believe that if I were to buy 10 put options on some DOW index that somewhere in the open market a market maker will be selling 10,000 shares (10 options * 100 shares per option) of the underlying security-- usually by borrowing it from the account of someone who owns the security "long". If my understanding is accurate, than the process of "short-selling" or buying puts would create it's own downward pull on the market. If everyone and their brother is shorting the market then this means the market is "somehow" absorbing massive selling due to the short selling and put buying AND there is enough traditional buying pressure to absorb all the negativity AND send the market to new highs. The new highs then put shorts under-water causing them to reverse position adding fuel to the fire (upward) and making everyone believe that the market CANT go down no matter what. The whole issue of short selling and buying puts is easy to understand, but not easy to understand how it is accounted for-- or what the rules are concerning the transactions. The reason I ask-- I have purchased significant put or call options-- to the point that the underlying activity should have made a noticeable dent in underlying volume-- but I never saw that change in volume I expected. So is the market just rigged worse than I ever knew? Does this question make sense?
You thnk you have enough cash to move DOW options on volume??!!! I'd stop trading now.
The computerized trading firms dominate and they are trading millions of shares, in and out all day long, that is were most of the volume comes from, You might move a peeny stock but not options of a major index.
Man vs. the machine.
Can the fully automated pricing computer (auto-MM) handle growing selling caused by propaganda generated market insecurity?
Sure ... just as humans could if they wanted to and had infinite debt money to purchase the equities.
IMO, price will not fall without a deliberate action by the banks to make it fall. There is no free market.
Greenspan? I would not take anything he says too seriously. Aside from destroying the central bank, he is notoriously wrong in his prognostications.
I fear we have been lulled into complacency by the extraordinary actions taken by central banks and governments over the last six years. It is important that we ask ourselves have these actions really worked or merely masked over major flaws and problems? For fun consider that by not demanding the right kind of growth and by throwing money at problems we have only delayed and added to festering issues that face us in the future.
Modern Monetary Theory often referred to as MMT to its many believers removes much of the risk ahead and guarantees that we will always be able to muddle forward. MMT is an economic theory that details the procedures and consequences of using government-issued tokens and our current units of fiat money. Newly acquired tools like derivatives and currency swaps are suppose to allow us to print and manipulate away problems. What I'm seeing develop is an "almost surreal" feeling of indifference towards reality. More on this subject and the fatal flaw in MMT below.
http://brucewilds.blogspot.com/2014/01/have-we-been-lulled-into-complace...
Duct tape & baling wire. I'd say, 'masked.' Like putting the brakes down hard on an 80,000-lb big rig going down a 7% grade at 90mph - slows it, but it's the sand pit that finally brings it to a stop.
No comments on whether this is a net short position for Soros? Might this be part of a hedge strategy for a long position?
So, in the future, Soros will be a net buyer? This counteracts a downward move.
Is it Soros or is it Memorex?
Previous ZH post showed Soros has a big put on:
"Soros has once again increased his total SPY Put to a new record high of $2.2 billion, or nearly double the previous all time high, and a whopping 17% of his total AUM."
http://www.zerohedge.com/news/2014-09-03/icahn-soros-druckenmiller-and-now-zell-billionaires-are-all-quietly-preparing-market
Thebook of all books on prepping
http://newamerica-now.blogspot.com/2014/02/beyond-collapse.html
I'd like to take a look at the book in pdf format. I've downloaded the zip several times and each time I extract the pdf from the winzip file and try to open it I get a Adobe error stating that it cannot open the file due to the file being damaged and can't be correctly decoded. Not sure if that's just happening for me or if the original zip file is corrupt for everybody. Can you check please and re-post?
thanks!
Try it again.
Message to top managers: Prepare to run (or jump... saves effort all around).
The market will keep going Higher till all you guys stop saying there is going to be a Crash
What goes up, must come down. Eventually
George Soros is a "renowned" investor not a "reknowned" investor, unless he re-learned something that will give him accolades.
If he is shorting and looking for a crash the bubble may be at full turgidity.
Margin Debt vs. Real Growth chart tells the debt ponzi/serf plantation story quite well.
Illiteracy and the complete lack of logical thinking is all part of the new normal. Nobody knows nothin; and they're proud of it.
It is not that stock value is increasing but rather the measurement tool, the U.S. dollar, is getting ready for a crash -- a big crash. It is just like real estate in Miami -- going crazy driven by foriegn investors looking to get real estate cheap.
The S&P @ 666 anything above that is smoke and mirrors that our future generations will pay for!
Hang'em high
That which is is publicly made available about Soros's actions is probably less than 50% of what he is actually doing.
And outdated.