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Late-1970s Deja-Vu; Did The Market 'Jump The Shark'?

Tyler Durden's picture




 

Just when you thought it was safe to get back in the water of shark-infested algos; just as we hit multi-year equity index highs (with the entire interest rate complex devastatingly divergent still - despite very-recent weakness), we thought it might be at least a little instructive to remember what happened in the late 1970s as analog. These 3 simple charts of Consumer Confidence, Capacity Utilization, and Initial Jobless Claims show just what can happen when you think it's all over.

 

While there are many analogs, we find these extremely timely given the somewhat similar underlying conditions that the world faces; to wit: "A Middle East 'tinderbox' that is very susceptible to a food price shock and a likely cause of an Oil price shock (as we saw in 1973-1974 and again in 1978-1979)."

 

Initial Claims - all looking good until 'Oil'...

 

Capacity Utilization peaking out after a sharp drop...

 

and Consumer Confidence 'double-topping'...

 

 

and the S&P 500's moves following the Claims and Confidence moves... -19% and -27%...

 

Charts: Bloomberg

(h/t Citi)

 

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Thu, 08/16/2012 - 15:04 | 2711700 Gubbmint Cheese
Gubbmint Cheese's picture

So... this is bullish right?

Thu, 08/16/2012 - 15:06 | 2711711 malikai
malikai's picture

This is very bullshi.

Thu, 08/16/2012 - 15:10 | 2711728 Hippocratic Oaf
Hippocratic Oaf's picture

I'd have to say extremely bullshi

Thu, 08/16/2012 - 15:14 | 2711753 Hype Alert
Hype Alert's picture

If you're into the QE thing, yes.

Thu, 08/16/2012 - 15:47 | 2711906 Stock Tips Inve...
Stock Tips Investment's picture

Manipulation before the elections will be very evident. The market will likely continue to rise and will benefit those who stay tuned. The market has its own dynamic and no search more explanations. If the market goes up, take long positions and make money. If the market goes down, take short positions and make money.

Thu, 08/16/2012 - 15:37 | 2711853 Gubbmint Cheese
Gubbmint Cheese's picture

PS - this was snark.. sad that I have to point that out.. but.. whatever

Thu, 08/16/2012 - 15:39 | 2711861 AlphaDawg
AlphaDawg's picture

This crappy analysis, using a smaill piece of data and assuming the rest is a bit poor.

Also, looking at PE ratios, from an earlier story, things arent that bad. Dont get me wrong, I stay outta the markets because of all the manipulation and buy fizz instead.

But you gotta admit, you are clutching at straws with this story?

Thu, 08/16/2012 - 15:56 | 2711949 trebuchet
trebuchet's picture

ok thin but a reminder to not get carried away. 

 

I saw some fed research that said inflationary/recessionary pressures of "oil price shocks" of 1970s and early 80s could have been avoided with monetary policy - controlling expectations.... 

 

only this time we have the taps full on

Fri, 08/17/2012 - 07:10 | 2713545 tbone654
tbone654's picture

yes... classic curve fitting...

Thu, 08/16/2012 - 15:54 | 2711934 AlphaDawg
AlphaDawg's picture

DP

Thu, 08/16/2012 - 15:54 | 2711935 AlphaDawg
AlphaDawg's picture

You are all just letting yourself hear what you want to hear, yu think everything is bearish.

This is a long term bear mrket, but fantasies about another stock market crash is all bullshit. The PPT wont let it happen. we are inthe great depression, but stocks have decoupled through fantasy accounting, low bond rates and the PPT.

 

Stop acting like gimps

 

This website has gone down the toilet due to all the stupid trolls.

 

Buy fizz, get laid and chillax

Thu, 08/16/2012 - 18:42 | 2712504 chump666
chump666's picture

No.

Oil shocks, inflation shocks, war, chaos believe it or not kill equities...very nicely. 

Now with thinning volumes and HFTs supporting the 50 and 100 MAs on air, momos chasing a single company (CISCO) + an overbought markets.  A slaughterhouse is coming, what will set it off?  Maybe oil inflation, again all eyes on Asia next session.  The full force of China/Asia on USD buys will take place again, that and they (China) WILL release some bad data to get the oil price to drop. 

Also the Germans will throw Merkel into the Rhine...she is off her brain.

Thu, 08/16/2012 - 15:06 | 2711710 Squid Vicious
Squid Vicious's picture

this time is different - the bernank wasn't in charge in the 70's, don't let his beard fool you!

Thu, 08/16/2012 - 17:51 | 2712369 Haager
Haager's picture

No way, it's no muslim beard? I'm losing faith...

Thu, 08/16/2012 - 15:06 | 2711712 DavidC
DavidC's picture

OK, so MACD and Stochastics all overbought, from hourly out to monthly....this must be getting close now...

DavidC

Thu, 08/16/2012 - 15:08 | 2711719 buzzsaw99
buzzsaw99's picture

Ayyyyyy!

Thu, 08/16/2012 - 15:11 | 2711734 Hippocratic Oaf
Hippocratic Oaf's picture

Whoaaaaaa!

Thu, 08/16/2012 - 15:44 | 2711890 Squid Vicious
Squid Vicious's picture

and to think, my hero from the late 70's was a 5'6" shnook from brooklyn named henry winkler... sad, really

Thu, 08/16/2012 - 15:15 | 2711744 Hype Alert
Hype Alert's picture

Going forward, to offset margin squeeze with rising material costs the only place to cut is labor.  It also forces more of that labor cost overseas because it's hard to have inflation without rising wages.  I can easily see the initial claims making that rise again.

Thu, 08/16/2012 - 15:21 | 2711755 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

The US was not a debter government at that point.  And even though investors were losing confidence in the dollar in the years previously, the Nixonian dollar was still a new concept, and concepts are hard to grasp when they are new - it is much easier to look back and see the path than it is to traverse roads seldom traveled (and fiats history is that it dies quickly, therefore the roadmap isn't well diamgrammed).  Now it is 40 years older, and this Nixonian dollar which is valued by decree is not only dying, but dead.

Things are diferent now.  History doesn't repeat, but it does rhyme.  Look for fiat currencie to lose at the end of the game - it is the weakest link.

Thu, 08/16/2012 - 15:26 | 2711803 centerline
centerline's picture

Beat me to it.  Yup.  Need to put up the Fed charts next to these to illustrate the differences between now and then.    

Thu, 08/16/2012 - 15:17 | 2711757 Zola
Zola's picture

2009 is not 1975 but 1970...

Thu, 08/16/2012 - 15:16 | 2711759 pingpongthesecond
pingpongthesecond's picture

JCat 600k should really get the market shooting up...

Thu, 08/16/2012 - 15:18 | 2711766 rubearish10
rubearish10's picture

Ah, that always reinforcing historical reference.

Thu, 08/16/2012 - 15:21 | 2711771 ekm
ekm's picture

GOOD JOB. ONLY OIL PRICE MATTERS FOR THE REAL ECONOMY, NOTHING ELSE.

Thu, 08/16/2012 - 15:22 | 2711783 RationalPrepper
RationalPrepper's picture

Gold from 1975-1979, courtesy of Kitco:

http://www.kitco.com/LFgif/au75-79.gif

Dipped from 180 to 100 in 1975, then topped 500 before 1979 was through.

Thu, 08/16/2012 - 15:26 | 2711801 RationalPrepper
RationalPrepper's picture

Assuming the dip in 2012 is roughly equivalent to the one in 1975, we'd be at 140.  If the move was repeated in identical fashion (on a percent basis), gold could dip to 1200 then hit 5700 in 2016.  Not sayin' it will...just thought it was interesting.

Thu, 08/16/2012 - 15:42 | 2711882 RationalPrepper
RationalPrepper's picture

Or if the bottom (100 per oz. in 1975) was at 1550 (2012), then the 75-79 run would equate to 7750/oz.

Thu, 08/16/2012 - 15:21 | 2711785 Doomer
Doomer's picture

It's different this time, cuz we got a shitload of debt.  Oh, wait ....

Thu, 08/16/2012 - 15:23 | 2711791 diogeneslaertius
diogeneslaertius's picture

no growth in 40 years

 

america: destroyed by design

 

ayyyyyyyyyyyyyyyyyyyyyyyyy

Thu, 08/16/2012 - 15:30 | 2711815 101 years and c...
101 years and counting's picture

plenty of growth in the bank accounts of the top 1%.  other than that, you are correct sir. 

Thu, 08/16/2012 - 15:29 | 2711807 Dr. Engali
Dr. Engali's picture

A lot of good chart porn today. My mental masturbation almost came to a conclusion then I remembered that we are in the midst of a centrally planned rigged market and it ruined the moment.

Thu, 08/16/2012 - 16:17 | 2712031 Hype Alert
Hype Alert's picture

When they can alter a pattern at will with comments or printing, it pretty much does throw the old charting in the trash. 

Thu, 08/16/2012 - 15:28 | 2711808 Heyoka Bianco
Heyoka Bianco's picture

If the stock market is really the manipulated mess it's supposed to be, then there's no point in comparing.

Shit, if you want to make facile comparisons, why not a chart of around 2500 BC, when a few years of low floods on the Nile drove wheat futures throw the roof and ratcheted up tensions in the "tinderbox" Middles East, which has always been vulnerable to a food shock.

Thu, 08/16/2012 - 15:31 | 2711823 Flakmeister
Flakmeister's picture

That Cap. Utl. plot is fugly....

Just think how it would look if we hadn't given all the job creators tax breaks....

Thu, 08/16/2012 - 15:36 | 2711829 AcidRastaHead
AcidRastaHead's picture

It didn't just jump the shark. Ponzirelli here jumped it with Acme boot-rockets, did a couple of flips and lapped the shark a couple of times and then channeling Danny Glover declared "I'm getting too old for this shit".

Thu, 08/16/2012 - 16:09 | 2711887 YouAreBliss
YouAreBliss's picture

Of course back then we had the GOP Nixon ending the Vietnam war - hugely contractionary.

 

Today we have a GOP - that makes war two at a time. and funded with deficit spending.

You can be sure the Romney/Ryan ticket, if elected, won't stop that train.  They're already drawing up the list, as pre-election Bush/Cheney did.

Let's See:

Iran/Syria First

China Next,

Then...it's reelection time.

We can be sure the massive defense-deficit spending will continue to pump-prime our glorious economy.  AND NOW WE GET TAX CUTS WITH OUR UNFUNDED WARS!!!  WHAT COULD BE MORE STIMULATIVE!!!!

Those old 1970's conservatives - were, well so conservative.  Welcome to the "new" conservative agenda!!!

As our "new" conservative stalwart, Dick Cheney loves to say "deficits don't matter", or DDM for short.  God bless his little mechanical heart!

Wars and Tax cuts for everybody! (of course deficit financed)   Hooray!!

Thu, 08/16/2012 - 16:23 | 2712052 Observer
Observer's picture

Yeah, Alice (and Albert) in wonderland!

Thu, 08/16/2012 - 16:17 | 2712032 walküre
walküre's picture

MANU below IPO price.

LOL!

Now you see it, now you don't. Oldest trick in the book.

Thu, 08/16/2012 - 16:38 | 2712105 centerline
centerline's picture

BDIY putting in a double top as well lately.

Thu, 08/16/2012 - 17:03 | 2712211 LouisDega
LouisDega's picture

Jump the shark.. Very clever. It worked. I ordered Jaws on Blu ray. See ad above.

Thu, 08/16/2012 - 19:30 | 2712629 Go Tribe
Go Tribe's picture

I'm sorry, Tyler, but you are just flat out wrong. This is not the 1970s or your father's value-driven market. This is manipulation at levels we can't even imagine with technologies we can't even imagine. It can go up for as long as they want it to go up. Dow 15K, 20K, 30K, whatever they want.

Thu, 08/16/2012 - 20:57 | 2712849 Shelby Moore III
Shelby Moore III's picture

Let's compare 1977 to 2008 and 1981 to 2012

In 1980, it was rising interest rates. In 2012, it is interest rates reaching 0% and not able to drop further. Both are the point where growth can't continue. The difference is that in 1980, rising interest rates were used to break gold's rise. In 2012, central bank fairy dust will be used to sustain negative real interest rates while the growth implodes, thus sending gold skyrocketing (opposite of 1980 result for gold).

Fri, 08/17/2012 - 07:26 | 2713571 hedgeisforpussies
hedgeisforpussies's picture

ony 4 years before runaway bull mrkt begins . i cant wait for it to start. dow 100k by 2025. 

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