Submitted by Charles Hugh-Smith of OfTwoMinds blog,
These charts help us understand that a top is not just price, but a reversal in extremes of margin debt, valuation and sentiment.
In blow-off tops, extremes of valuation, complacency and margin debt can always shoot beyond previous extremes to new extremes. This is why guessing when the blow-off top implodes is so hazardous: extreme can always get more extreme.
Note the explosive rise in margin debt in the past few months:
At tops, soaring margin debt no longer pushes stocks higher. I've marked up an excellent chart by Doug Short to highlight the diminishing returns of more margin debt at tops.
It's clear this same dynamic of diminishing returns is in play now, as margin debt has skyrocketed while the S&P 500 has remained range-bound, with each new high being increasingly marginal.
Exhibit 2 is China's Shenzhen stock exchange. The price-earnings ratio (PE) is a useful gauge of sentiment: when sentiment reaches extremes of euphoria, PEs go through the roof:
It appears that the Shenzhen bubble has burst. Latecomers to the bubble party will continue to buy the dips, but the ADX (a measure of trend strength) has been diverging for quite some time, and the MACD is rolling over into a sell signal.
These charts help us understand that a top is not just price, but a reversal in extremes of margin debt, valuation and sentiment. Many observers have an unyielding faith that central banks will never let markets decline ever again. There are four flaws in this blind faith:
1. Central banks did not want bubble markets in 2000 and 2008 to burst, either, but the bubbles popped despite central bank interventions.
2. Extremes can only get more extreme for a limited time. margin debt cannot rise from $507 billion to $5 trillion and then on to $50 trillion (three times the size of the U.S. GDP). The Shenzhen PE ratio cannot rise from 70 to 700.
3. Complex systems cannot be beaten into submission by two simple sticks (central bank liquidity and zero interest rates) forever. Extremes give rise to dislocations that cannot be beaten into submission by central banks for this reason: it is the nature of complex systems to break at the very points that cannot be strengthened or defended by simplistic manipulation.
4. When the speculative frenzy dissipates, central banks will be the only buyers left. Unless the Fed increases its balance sheet from $4.5 trillion to $14.5 trillion in a matter of months, even central bank manipulation will be swamped by sellers exiting bursting-bubble markets.
Rather extreme according to Jim Willie...The Golden Jackass is predicting the US Dollar Will Not Survive 2015!
http://www.silverdoctors.com/jim-willie-us-dollar-will-not-survive-2015/
So you believe his " sources" like "The Voice" and "London Paul" actually exist?
Can and will
Amazon doesn't need profits.
Why should anyone else;)
Good article by Jim Willie.
Although I wouldn't go as far as he does in predictions, I agree with most of what he says.
I'd like to see Zero Hedge start a contest. "Pick the Day the Dow closes down 500 points." Give the winner a cheap plastic trophy. Maybe make it a little tougher -750 points?
Is that even possible in this "market" anymore?
Market will get shut down, and algos will panic buy when they re-open it.
Dibs on 9/11.
Why not Tylers? That contest would bring new viewers to the site. I'll take 9/18/15.
9/19/15
6/15/15
I'll buy the rest of the September grid, and First week of October.
That trophy will sure look good next to my senior league participation trophy 2010.
They can keep changing the rules and making more and more BIS countires give up capital controls and open up their financial markets. Kind of how Forex trading is a 24/7, global market where Indian rubes get culled just as easily as american ones.
If India was to be "deregulated" as an example and become fully convertible, that would give the ponzi directors another 7-10 years of debt slave creation. Easy.
Likewise I imagine for malaysia, Indonesia....China is doing it well enough by themselves, but a free floating Yuan, fully convertible? Wham!
It can go many ways yet, but the immediate future seems full of not-good ness so to speak..
Goodness : https://www.youtube.com/watch?v=lk1TSBW_368
"...Unless the Fed increases its balance sheet from $4.5 trillion to $14.5 trillion in a matter of months, even central bank manipulation will be swamped by sellers exiting bursting-bubble markets."
DAMN IT CHARLES!
Don't give them any bright ideas.
Didn't seem to trouble them back in 08.
we still have no idea how much,if any, was paid back.
I suspect they cashed out China's USTs around then ,along with the RMBS holdings
they admitted to.Easy to hide the canoli in that ammount.
Okay Chuckie,, another doughty diatribe like Stockman or PC Roberts. So, why don't you tell us what will happen next?
Well, the end may be nigh. Or the beginning. Whatever.
When this reality is swept away, what replaces it? Did I stockpile the right items? Or will we progress to a point where no stockpile is going to help? Or maybe we get more of the same, just with pretty wrapping paper and a pink ribbon? Do I shoot myself now, or shoot them later, or trade my bullets for a bag of beans?
Fuck if I know.
Ain't life grand!
You still have some freedom to choose.
When this bitch blows - it will wrap itself around the globe a thousand times.
"Stop whoring for Wall Street"
http://www.showrealhist.com/yTRIAL.html
http://patrick.net/?p=1223928
"Stop whoring for Wall Street"
http://www.showrealhist.com/yTRIAL.html
http://patrick.net/?p=1223928
It seems this picture is dated, that intsersection was a block back, we're at Faith and Hope, a little further south.
A bit of Dali - esque melt would freshen it up a bit.