Guest Post: It Sure Looks Like 2008

Tyler Durden's picture

From Tony Pallotta of Macro Story

It Sure Looks Like 2008

"He observed that human emotions collectively had major impacts on the on stock prices and the patterns seen in the Stock Markets in general." - From a book on the teachings of Jesse Livermore

When you think of it in the short term markets are nothing more than a group of people trying to process data and understand what others are doing all under the stress of losing personal wealth. They are trying to solve a problem that in may ways is not solvable unless one can adapt. Similar to a group of Navy SEALs on a mission. They are successful only if they can adjust to the changing situation. There's a reason few are SEALs and few are successful in this business.

At times like these markets are more about human psychology and less about technical and or macro data. That is why I wrote about the 2007 topping pattern as compared to the market in June and July. The macro data in both instances was deteriorating yet equity markets refused to listen to falling bond yields, falling commodity prices and countless credit products. Then the recession hit, the data deteriorated fast and ill prepared markets were forced to catch up.

Now I believe it is time to fast forward to the fall of 2008. Once again the 2008 market is a road map of how human emotion reacts when credit events happen. When economic data deteriorates at an exponential pace. When the unthinkable becomes reality.

The volatility skew relative to the vix captures market sentiment very well. Overlay any such chart with the SPX and the similarities are without question. So for all those pundits who say this is not 2008 I present the following chart. Once again markets are pricing in the unthinkable. In 2008 history witnessed the failure of Lehman, AIG and the GSEs. Today history is bearing witness to sovereign nations on the brink of failure. In 2008 there was the threat of bank runs. Today there is the threat of currency runs. In 2008 there were government bailouts. Today there are central bank bailouts.
 

Through it all market participants have not changed. They are still a group of individuals trying to process data and understand what others are doing all while real money is on the line. As history has proven once again they will get it wrong. Once again leverage will destroy balance sheets. Denial will get in the way of rational thought. History truly does repeat and the patterns are present in the charts.

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Dr. No's picture

Looks like 2008? not really, gold is not $500/oz.

Doubleguns's picture

Shhhh, are you trying to wake the CME margin increasing bastards up.

Long-John-Silver's picture

That pony has played it's one trick. They tried it again with Gold and all that pony got was an $1,800+ brand burned in it's ass.

mayhem_korner's picture

According to my receipts, most of my gold is $500/oz.  ;)

urbanelf's picture

You seriously need to return your gold and get the $1800 kind.  Actually, I've got a few $2000 golds if you are interested.

Bunga Bunga's picture

The same receipt you will get soon from government, forced.

Bastiat's picture

Yeah, he better unload that crap fast.  I'll give him $750 oz right now.

Fukushima Sam's picture

Monetary half-life getting shorter, bitchez!

Caviar Emptor's picture

This is the greatest buying opportunity moment the world has ever seen! 

No, this is!

No....THIS is! 

 

It just keeps getting better and better the worse things get and the lower it goes! 

Central Bankster's picture

LOL how about those guys they parade on CNBC, calling a bottom every 10 points down on the SP. 

Clearly_Irrational's picture

Don't be silly, everyone knows it's not a bottom until Cramer throws in the towel.  Hasn't happened yet, therefore we're still in free fall mode.

chistletoe's picture

same canyon?  check.

 

same weather?  check.

 

same lone ranger and tonto?  well, not exactly, but there are similarities.

 

same horses?  check.

 

same indians?  well, there do seem to be a few more, this time around.

 

does history repeat?  No.

 

This time, the lone ranger has no bullets .....

sitenine's picture

By the time this is played out, you will WISH it 2008!

...unless you have PM, of course.

Caviar Emptor's picture

We're starting the next leg down with much less dry powder

Gibu The Great's picture

My question is do we continue with that leg down tomorrow... or is this going to be a little more of a drawn out process (perhaps extending into next year).  Doug Kass says the XLF is going to be up 10-15% in 2 months and up 50-100% in the next 12, so I guess that means we're headed lower right away.  

Stumpy's picture

I know that the worst thing that could happen to my portfolio is a long sideway drag, killing all my calls and puts.

Tuco Benedicto Pacifico Juan Maria Ramirez's picture

You might consider selling some furrher out strikes puts and calls to hedge?  Volatility is probably up from when you bought your puts and calls so you may be able to capture some decent premiums.  Good luck!

RobotTrader's picture

Blowoff top in 30-yr. bonds today as Tom Keene's jaw was dropping on the floor this morning.

http://finviz.com/fut_chart.ashx?t=ZB&cot=002602&p=d1

 

midtowng's picture

It can't be like 2008. Why? Because I read an article Yahoo Finance from CNBC that it wasn't like 2008.

Dr. Porkchop's picture

2011 looks nothing like 2008.

2008 has two boobies stacked sideways on the end, 2011 has two sticks.

seek's picture

I came here to post the same thing. It's off the front page now, but the moment I saw it, I said there's your mainstream media denial, which confirms it's exactly like 2008!

Random_Robert's picture

Enough of that crazy-talk. This is nothing like 2008...

2008 was all GWB's fault.

This time it's those pesky tea-partiers.

 can't believe our perfect utopian pelosi-paradise where no one has to work and money is free is being trampled underfoot like this.

 

That's it- I'm calling the President of my local Bilderberg chapter.

mayhem_korner's picture

I do declare it's high time for Senora Pelosi to take another trip to Syria.  Maybe outfit her with a headscarf with "Assad Rocks" embroidered on it.

papaswamp's picture

I think this is a bit worse than 2008...the convusions are worse. I think there will be one more stick save that will last into Q1-2 2012...then the game is over. Or the powera that be will just step away and let it fall sooner rather than later.

Either way a major conflict or series of medium ones will break out. ME will start things off, followed by Asia.

SamAdams1234's picture

It is worse: political instability that was not present in 2008.

sun tzu's picture

How is it more unstable now? One party rule has always been disastrous. 

LBJ 1963-1968

Jimmy Carter 1976-1980

Bush Jr 2002-2006

Obama 2008-2010

ZippyDooDah's picture

I think he was referring to the international scene.  World > USA.

Tuco Benedicto Pacifico Juan Maria Ramirez's picture

China reaffirmed recently that any attack by NATO or another entity on Pakistan would be considered an attack on China.  The U. S. is itching to dismantle the Paki nukes.  Stay tuned.

Bobbyrib's picture

Whatever..I have some cheap, "disposable" shit to buy from Walmart made from our friends in China. /sarcasm

Another word for the globalization loving crowd is liberal.

 

roccman's picture

yep the next FF will be something that strangles oil supplies

 

and of course the dinner table is set for the ME to be blamed

 

the last act of masking peak oil effects and racking the world into rationing/martial law/kill off

 

think about it

sun tzu's picture

Oil dropped to $33/brl in March 2009. Marginal demand determines prices.

roccman's picture

wrong EROEI determine prices

Gonzalo Lira's picture

Didn't I write exactly this just a couple of days ago? I'm sure I did . . . and didn't I call it . . . uh, something like . . . "The Sequel"?

http://gonzalolira.blogspot.com/2011/08/sequel-how-2011-is-repeat-of-200...

You know, I think I even got interviewed on it on The Alyona Show . . . or was I dreaming?

GL

nyse's picture

I actually printed this out and distributed around my office. Well done ;)

Shell Game's picture

ah, but yours did not include snazy chart.. 

Caviar Emptor's picture

We didn't have this in 08:

 

Recent readings taken at the [Fukushima Daiichi] plant are alarming.

When on August 2nd readings of 10,000 millisieverts (10 sieverts) of radioactivity per hour were detected at the plant, Japan's science ministry said that level of dose is fatal to humans, and is enough radiation to kill a person within one to two weeks after the exposure. 

10,000 millisieverts (mSv) is the equivalent of approximately 100,000 chest x-rays.

It is an amount 250 per cent higher than levels recorded at the plant in March after it was heavily damaged by the earthquake and ensuing tsunami. 

"How much radioactive materials have been released from the plant?" asked Dr Tatsuhiko Kodama, a professor at the Research Centre for Advanced Science and Technology and Director of the University of Tokyo's Radioisotope Centre, in a July 27 speech to the Committee of Health, Labour and Welfare at Japan's House of Representatives. 

According to Dr Kodama, the total amount of radiation released over a period of more than five months from the ongoing Fukushima nuclear disaster is the equivalent to more than 29 "Hiroshima-type atomic bombs" and the amount of uranium released "is equivalent to 20" Hiroshima bombs.

centerline's picture

And no news at all about it any more.  Amazing.  Full scale media blackout.

OutLookingIn's picture

Something like the MSM reporting of the strawpoll and how Ron Paul wasn't even there! According to the MSM.

Tuco Benedicto Pacifico Juan Maria Ramirez's picture

After the Fukushima disaster thunder thighs Hillary Clinton flew over to Japan and agreed that the U. S. Government's stance regarding foodstuffs imported from Japan to the U. S. is that they would be safe!  So our masters are not even testing imported food coming from Japan!

Bobbyrib's picture

Japan would do the same for us. It's not like they banned the importing of American beef when Mad Cow disease hit, is it? /sarcasm.

 

We need a candidate for President who will make sure we are not the world's bitch.