Weekend Reading: The Beginning Of The Ending

Tyler Durden's picture

Submitted by Lance Roberts via RealInvestmentAdvice.com,

A few week’s ago I discussed the post-election surge in the market based on rather optimistic outlooks as opposed to the technical underpinnings that currently exists. As I specially stated in the weekend newsletter entitle “Dow 20,000” the market was beginning to take on an eerily similar feeling:

“If this market rally seems eerily familiar, it’s because it is. If fact, the backdrop of the rally reminds me much of what was happening in 1999.

1999

  • Fed was hiking rates as worries about inflationary pressures were present.
  • Economic growth was improving 
  • Interest and inflation were rising
  • Earnings were rising through the use of “new metrics,” share buybacks and an M&A spree. (Who can forget the market greats of Enron, Worldcom & Global Crossing)
  • Stock market was beginning to go parabolic as exuberance exploded in a “can’t lose market.”

If you were around then, you will remember.”

With Janet Yellen and the Fed once again chasing an imaginary inflation “boogeyman” (inflation is currently lower than any pre-recessionary period since the 1970’s) the tightening of monetary policy, with already weak economic growth, may once again prove problematic.

“But Lance, this is the most hated bull market ever?”

If price acceleration in the market is a sign of investor optimism, then the chart recently published by MarketWatch should raise some alarm bells.

 

The only other time in history where the Dow advanced 5000 points over a 24-month period was during the 1998-1999 period of “irrational exuberance” as the Fed was fighting the fears an inflationary advance, while valuations were rising and GDP growth rates were slowing.

Maybe it’s just coincidence.

Maybe “this time is different.”

Or it could just be the inevitable beginning of the ending of the current bull market cycle.

Here is what I am reading this weekend.


Fed, Economy & More Trump


Markets


Interesting Reads


“Do. Or Do Not. There Is No Try” ? Yoda, Empire Strikes Back

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Dr. Richard Head's picture

It's different this time don't cha know. 

 

Truther's picture

Finally I hope.... BTFD.

Tylers, don't screw this up.

Then again, Lance might do it for you.

Croesus's picture

@ hedgeless:

It's a decent article, but 1 oz. K-rands are one of the most commonly-faked gold coins out there. For people trying to buy simple bullion-issues, my recommendation is to buy whatever is locally-minted, because it's better-recognized.

For personal preference, I like common-date numismatic US gold, like the 1924 St. Gaudens (graded MS63-64, preferrably).

When gold prices are down, they can be picked up for very little premium above spot in MS63-64. When gold prices are up, the premium spread widens pretty dramatically.

I don't at all fear a 6102-style confiscation; times have changed a lot since then:

1. Gold/silver circulated as money in 1933.
2. Most people don't own it in meaningful amounts.
3. Decreeing is one thing; enforcement is another.
4. The overwhelming majority of privately-held gold is held in "captive places", not private hands. (GLD for instance, which would be the first target in a confiscation).
5. Compliance; most will bury/hide, before they'd turn it in.

divingengineer's picture

My advice to new stackers is buy low premium coins and bars. Premiums are easy to pay and hard to get back. French Roosters, 2 Rand SA coins, fractional gold bars in a security card, Swiss 20 Francs, all great low premium gold buys. Silver is same, I like Maples, Phils, Bars from a known mint for low premium. I have a collection of graded coins as well, but you have know what you are doing 100% or you will get boned on graded coins.
I have used Provident Metals and JM Bullion exclusively for years and am very happy with both.
Main thing is buy physical, not GLD, SLV bullshit.

sprintjump's picture

Is it different? With municipal pension issues popping up, are we going to see a continuing upward run in equities? It seems that there is a gaining narrative that 'bonds are topped' and we'll see the bottom fall out of the bond market soon, and has already begun. 

 

I admit, I'm not formally studied in the econ/finance world, but I ask for any 'crystal ball' guidance that can potentially help in the future.

 

buzzsaw99's picture

it was barzini (the fed) all along. [/don corleone]

DavidC's picture

Meanwhile it keeps going up, even though the jobless figures today were 156k against 178k expected, record 95.1 million people not in the labour force and November Factory Orders dipping the most since August 2014.

DavidC

deoldefarte's picture

IMHO, these job numbers are pure BS.  Each month, we have, here in USA, 150,000 workers retiring

from the workplace.

So replacing these with "new workers" leaves just 6000 new hires.  And this being the

December figures, they were in all probability just Holiday temporay workers.

max2205's picture

Fed is in control.   Stay calm 

blueberry100's picture

The "Recovery"  is not complete.  J Yellen.

ThrowAwayYourTV's picture

I still believe they are setting up Trump for a major pie in the face.

JBPeebles's picture

Anybody tried to do a wire transfer recently?

Apparently the money didn't go through. Disconcerting as we had all the account information correct.

My guess is that they got my money and use it to pay off some other party, then slapped an IOU in my account to buy enough time to get some other sucker to put money in that they can then use to pay off me.

Trust is the most significant component of any relationship. If they don't trust you, you don't trust them. This personal example shows that counterparty risk is vast.

After all, your statement is only that--a statement. None of the numbers therein may reflect what you own or not. Madoff sent out reputable-looking statements. I'm sure they could handle withdrawals based on new funds coming in to the Ponzi up to a point.

A new investor would receive notification that funds and arrived and been invested in accordance with the depositor's instructions. You wouldn't therefore know if your deposit had been used to pay off Paul.

Robbing Peter (me) to pay Paul (holder of senior debt) is right out of a chronic debtor's playbook. When lacking funds, one deposit can be used to pay off another creditor. Banking laws allow this to some degree.

Absent regulatory oversight, commingling is common. Therefore counterparty risk has vastly zoomed.

Judging by the relatively small size of my transfer the banking system appears to be insolvent at this time. Of course those at the top of the hierarchy get their money out first. Just like the initial investors in the Ponzi get their money out first. Yet in this case the Ponzi is becoming cash-starved and incapable of letting smaller transfers occur, so bad is the short-term need for cash. This is the first example of financial deterioration I've seen but I suspect most of us will be having issues trying to move money in this system.

The solution is to delink any assets you have from the system and put them somewhere safer. It also holds extremely well for gold and paper cash, both of which need to be stored safely in physical form. Being off-site, there are risks involved there, like bank holidays, forfeiture or confiscation. These are still preferable to a Ponzi/Madoff like scenario which I'm afraid is occurring now--which is a system of legalized theft and de facto fraud.

divingengineer's picture

Curious. I did a $21,000 this summer and it was instant. You might have made a discovery, with lower volume could it seize up altogether?
Few years ago I tried to withdraw $7,000 to buy a used truck. I learned then and there that once you deposit it, it's not yours anymore. They act like it's theirs and throw a fit when you want some. It really woke me up, and there is an accute shortage of cash, go try to withdraw $5,000 and see how they act if you don't believe me.

BocceBaal's picture

It's the percent increase that matters, not how many X,000 milestones it passed. In this case, the % increase is still quite high.

Nomad Trader's picture

Ahhh, how come the author doesn't understand percentage gains vs price gains.. also doesn't understand the Dow is a Mickey Mouse index in that it is price weighted not maket cap weighted. Best indicator of stupidity is people who talk about Dow points gains.

divingengineer's picture

You sound like one of those Russell 3000
guys.
I hate those guys.
They're all affected by the USDX, what's the diff?