Next Stop: Dow 100,000

Tyler Durden's picture




 

We thought that Jeremy Siegel, Laszlo "the Ruler" Birinyi and Jim Altucher were optimistic with their stock market targets. Sadly, with their equal to or less than 20,000 Dow Jones predictions, the three merely come off as rank amateurs, especially when compared to the forecast of BNP's head of fixed income Philippe Gijesels, who sees the stock market at 100,000 at some point over the next 25 years. However, unlike the previous trio who bases its forecasts on misguided expectations of economic growth, Gijesels may actually end up being right, because his estimate is predicated on one simple thing: hyperinflation, or specifically 12.2% inflation each year, which for a country like America is tantamount to the dreaded H-word. The other premise used by Gijesels: too much debt which has to be inflated. And actually, he is spot on. The only problem is that when the Dow hits 100,000 due to money printing, which is his underlying thesis, one will needed scientific notation to express the price of any hard asset (and most certainly gold), because if America falls in a two-decade long Weimar republic phase, the Dow may well be 100,000 or 100 googol - the truth is it won't matter as the money this number translated to would be absolutely meaningless. Just ask the Weimar Germans, who may have had some tremendous monthly increases in their 401(k) statements, but all they really cared about is whether they had the latest and most fashionable wheelbarrow model.

 

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Tue, 05/15/2012 - 18:17 | 2429210 CClarity
CClarity's picture

It could happen way sooner . . . if it is priced in drachmas!

Tue, 05/15/2012 - 18:20 | 2429230 AldousHuxley
AldousHuxley's picture

I think it time to hand over nuclear button to Sarah Palin with target coordinates set to DC and Manhattan.

Tue, 05/15/2012 - 18:28 | 2429286 strannick
strannick's picture

And to think that at this moment in time you can still trade this govt script for gold...

Tue, 05/15/2012 - 18:39 | 2429328 SHEEPFUKKER
SHEEPFUKKER's picture

What comes first? Dow 100,000 or Dow 1,000?

Tue, 05/15/2012 - 18:49 | 2429359 goldfish1
goldfish1's picture

Craps. I'm not at the Dow table.

Tue, 05/15/2012 - 20:19 | 2429647 Comay Mierda
Comay Mierda's picture

Dow will hit 1,000, prob at parity with gold, before it hits 100,000

Dollar is still safest game in town in the market's eyes (for now)

Tue, 05/15/2012 - 20:54 | 2429753 bigkahuna
bigkahuna's picture

I agree. Plus if you get hyperinflation, you also have currency destruction. Good freakin bye dollar and US markets.

Tue, 05/15/2012 - 21:22 | 2429829 rocker
rocker's picture

+1 Bye, Bye Dollar.   It is the hidden tax on those who can not invest in anything.

It is equal to Zimbabwe Dollars soon.  Capitalism at it's best after the FED bails out everything.

What a Sad joke to be a American. Whoops, I am American. Shit, Dam, Fuk.

Foreigners may send get well cards.

Tue, 05/15/2012 - 19:02 | 2429409 DeadFred
DeadFred's picture

We may be honored to see the fabled megaphone pattern, progressively higher highs and lower lows. This sort of pattern occurs in controls systems when feedback regulation fails to compensate for foreseeable events. This is what the algos and their nanosecond perspective will produce. It hasn't mattered to the algos that Greece wasn't fixed, all they cared about is whether they were going to default in the next hour. So they go all out until the event and momentum carries them beyond. You may have experienced this when you came home drunk and tried to put your key in the lock, each time you try you miss by more than the last time until you give up and sleep on the porch. Faulty controls. It doesn't help any that those in charge of moderating the economy are using flawed theory to do it. If you see it happening you can make a killing on the swings because everyone expects the waves to dampen with time. That is so last century.

Tue, 05/15/2012 - 20:11 | 2429612 Golden monkey
Golden monkey's picture

Sleeping in a fully covered (ak, 47, riots) porsche will be safer than on the porch in a not so distant future, I guess

 

 

 

Tue, 05/15/2012 - 20:25 | 2429663 Buck Johnson
Buck Johnson's picture

I know, the sick thing is that when the gold manipulation (along with silver) is demolished we will wish to be able to buy gold and silver at today's prices.  Hyperinflation is coming to american and it will be nasty.

Tue, 05/15/2012 - 21:24 | 2429290 Manthong
Manthong's picture

Yep.. at which point it will be at parity with a 1 oz. A.G.E..

Think of it.. whether it's Dow 100K, 10K or 1K, the parity concept makes sense.

Sooner or later digital synthesizations of value will have to reconcile to an absolute.

Tue, 05/15/2012 - 18:35 | 2429316 Nothing To See Here
Nothing To See Here's picture

Now we at least know why mainstream presidential candidate Gingrich wanted to build a moon base. Why, so that the Dow could land somewhere.

Tue, 05/15/2012 - 18:35 | 2429315 Elwood P Suggins
Elwood P Suggins's picture

So can we assume the next big growth industry will be wheelbarrows?  Maybe this is what's going to keep Apple going - a iMacbarrow.

Tue, 05/15/2012 - 19:21 | 2429492 Rich Bagg
Rich Bagg's picture

Sounds like I should buy JC Penney's on this dip since a pair of fruit of the loom underwear will be costing $1 million and JCP nominal profits will be skyrocketing right?

The hyperinflationists have a few holes in their logic.

 

 

Tue, 05/15/2012 - 23:17 | 2430209 pavman
pavman's picture

I think the lesson here is buy fruit of the loom and skip JC Penny's.  In a hyperinflation scenario, real assets, like clean underwear, will be worth a helluvalot more than JCP.

While stocks are slightly removed from cash, they're only really kept at bay by that contract thing.  Once you see hyperinflation, don't think contracts are going to be worth much and profits will become non-existent within the hyperinflating economy.  Sure they may have the best hedge in the world: Emerging markets, but they'll still feel the pain of the death of American Consumerism.  Just write to our neighbors to the south and find out how they dealt with it in the 80s and 90s.

Hint hint: they bought in advance of currency depreciation (we even saw it last year when venezuela or argentina devauled their currency...just before it happened, there was a run up on hard household goods by the masses who won't be fooled again).

Tue, 05/15/2012 - 19:20 | 2429494 old naughty
old naughty's picture

Don't we love those bananas ?

Tue, 05/15/2012 - 18:18 | 2429212 icanhasbailout
icanhasbailout's picture

What's the price of gold, silver, food and ammunition in this Dow 100,000 scenario?

Tue, 05/15/2012 - 18:23 | 2429242 LetThemEatRand
LetThemEatRand's picture

Here' s a hint.  You'll see a lot of superscriptlike this to save on zeros.  At Wal-Mart you'll have price cuts like this:  Was $1010, now $109

Tue, 05/15/2012 - 18:25 | 2429258 jus_lite_reading
jus_lite_reading's picture

He might be right... only if the system didn't collapse before then. Because before QE3-QE666 are launched and gas costs $25/gal, their heads won't just be rollin' in the streets...

GAME OVER

Tue, 05/15/2012 - 19:08 | 2429429 DeadFred
DeadFred's picture

Thanks for making us smile :)

Tue, 05/15/2012 - 22:05 | 2429989 yogibear
yogibear's picture

Just point the mobs to Bernanke and his children when hyperinflation occurs. Like the  Czar and his family during the Bolshevik revolution.

Tue, 05/15/2012 - 22:42 | 2430073 fourchan
fourchan's picture

and ron pauls silver dime will still buy a gallon.

Tue, 05/15/2012 - 18:33 | 2429306 Marginal Call
Marginal Call's picture

They always teach Americans math by accident.  We learned the metric system from the war on drugs.

Tue, 05/15/2012 - 19:20 | 2429493 IndicaTive
IndicaTive's picture

I learned the metric system buying drugs. I perfected the metric system it selling drugs. All I had do was buy my own scale. And calibrate it myself.

Tue, 05/15/2012 - 21:22 | 2429830 Global Hunter
Global Hunter's picture

plus one ounce!!!

Tue, 05/15/2012 - 18:38 | 2429326 Arnold Ziffel
Arnold Ziffel's picture
In a colossal mix-up, an agent lists, shows and sells a foreclosure property. The new owner upgrades it before learning she really bought the place next door.

 

http://money.msn.com/personal-finance/article.aspx?post=76bfdc60-43c1-41...

Tue, 05/15/2012 - 18:21 | 2429249 CPL
CPL's picture

More than a fist full of paper.  Add a community on top of that and it becomes home.

Tue, 05/15/2012 - 18:25 | 2429266 piliage
piliage's picture

An ordinary cup of drinking chocolate costs four million pounds, an immersion heater for the hot-water tank costs over six billion pounds, and a pair of split-crotch panties would be almost unobtainable. A simple rear window de-misting device for an 1100 costs eight thousand million billion pounds and a new element for an electric kettle would cost as much as the entire gross national product of the United States of America from 1770 to the year 2000 and even then they wouldn't be able to afford the small fixing ring which attaches it to the kettle.

Tue, 05/15/2012 - 18:32 | 2429304 Ag1761
Ag1761's picture

piliage, absolutely brilliant, made me spit my whisky lol

Tue, 05/15/2012 - 18:35 | 2429314 piliage
piliage's picture

I only steal from the best...

http://www.youtube.com/watch?v=kXEgRGvfOwE

 

 

Tue, 05/15/2012 - 21:58 | 2429960 Pure Evil
Pure Evil's picture

Not to worry, by that time, all currency will be digital and BitCoin will solve the need to buy wheelbarrows to haul around all that toliet paper.

Tue, 05/15/2012 - 18:59 | 2429397 RoadKill
RoadKill's picture

Gold will be $10,000 an ounce and silver $100 an ounce. Sorry to bust your bubble but good stocks would outperform inert metals in a 20 year 15% inflation scenario because they would still have REAL growth and reinvestment opportunities and over 20 years the shock of 15% inflation would wear off and get priced in.

Gold and silver only out perform good stocks if Dow goes to 100,000 in 2 years. Unless your gold reproduces.

Btw the people that make out best are the ones that borrow money today and buy stocks.

Tue, 05/15/2012 - 19:13 | 2429463 DeadFred
DeadFred's picture

We assume in your mind those good stocks are hanging out with the Easter Bunny and Santa Claus playing with the nice unicorns.

Tue, 05/15/2012 - 19:27 | 2429509 RoadKill
RoadKill's picture

So you seriously think their are no good companies in the entire market of tens of thousands of companies. I know plenty of names where the P/E multiple is lower then the cash of cash return and you can buy for around book value. And I'm talking good basic easy to understand companies, not high growth super companies where the demand for their services goes away in a bad economy.

Not that that means the market is a buy. I have <$1mm of longs vs $2mm of triple levered shorts. So I'm WAY short, but as the mkt falls I sell my triple levered longs ON THE MARGIN and buy more of my longs. If the mkt goes up I sell the longs ON THE MARGIN and buy more triple levered short ETFs.

BUT PERSONALLY I have different levels of net exposure for different mkt levels. At 666 on SPX you wanted 150%+ net long exposure. At 1,450 you wanted -300% net long exposure. Rinse and repeat.

You now know how to run a hedge fund. I should charge you 2/20 for that! :)

Tue, 05/15/2012 - 19:58 | 2429601 UP Forester
UP Forester's picture

Those good companies still have to compensate employees at a rate equal to or greater than inflation, if they still want people to buy their good products.

As far as I can see, the majority of real wage growth is going to the top floors of good companies.

When the real rate of inflation, not the bogus, hedonically adjusted and substituted CPI hits 20% due to the next overt round of CTRL-P, there aren't going to be enough buyers of products other than food and energy.

It doesn't matter what the paper game does, I'll sell my neighbors a dozen eggs for a pre-'64 dime, and they'll be grateful.  Either that, or they can work my land for food and shelter.  Have fun scrounging dumpsters with the rest of the financial scalpers.

Tue, 05/15/2012 - 21:09 | 2429786 zebrasquid
zebrasquid's picture

A monkey could do what you do, no offense intended.   Too rote, too much assumed about equalibrium and stability in a time when whole countries are on the brink of financial collapse.

What happens to your model when the markets shut down for weeks or months?   Those leveraged etf short funds get frozen and no longer compute ...so they won't be there to hedge your crushed longs.

Like what happened to the fail-safe Titantic when their assumptions failed.

Gold in hand does not have that problem.   Gold in hand did not suddenly become illiquid on the week of 9/11, unlike anything else you can think of (other than cash, which only has a fixed value).

Tue, 05/15/2012 - 22:07 | 2429979 Pure Evil
Pure Evil's picture

You man not be able to eat gold, but you definitely can't eat a levered ETF. If the shit hits the fan, you can purchase food with PM's, the most you'll be able to do with a levered ETF is wipe your arse. Cause it's only paper and paper is only good for two things, scribbling notes and wiping your vertical crack.

Tue, 05/15/2012 - 22:35 | 2430064 zebrasquid
zebrasquid's picture

You don't even get paper anymore...electronic digits are not even good for wiping..(though they are easier to wipe away any record of)

Tue, 05/15/2012 - 19:37 | 2429533 Axenolith
Axenolith's picture

That presumes assumptions that can be avoided by buying the gold and silver.  First, having the gold and silver, I don't need to take my actual savings out and buy shit I'll need next year today.  Next, I don't have to sift through the Russel, DOW, S&P et.al. while holding down a 50 hour a week job (and no, I'm not going to do it on the weekend because I want to also have a fookin' life outdoors while I still can run jump shoot fish detect) and figure out the few companies that aren't going to have significant overseas supply chains, curency risk, etc... that will get hammered by a devaluing dollar.  Furthermore, I won't have picked the few winners only to have some pustulating bag of corrupt shit blow up where I have them parked and Corzine them.

Granted, I could take delivery of the paper shares... But they aren't shiny and they could burn.

Tue, 05/15/2012 - 20:15 | 2429632 ElvisDog
ElvisDog's picture

There's no fucking way the U.S. population puts up with 12.5% inflation in gasoline for 25 years. Same with food. Memo to the retard who came up with this prediction - read a fucking history book, like, say, of the period before the French Revolution.

Tue, 05/15/2012 - 18:18 | 2429217 czarangelus
czarangelus's picture

Seems like as good a place to ask as any. I'm a working class stiff without huge amounts of money to throw into PMs. I have ~240 oz of physical silver, and my big worry is - will that be enough? DOW 100,000... why the fuck not... they can just print their way there.

Tue, 05/15/2012 - 18:34 | 2429305 CPL
CPL's picture

In that scenario the paper and credit offered becomes more and more valueless, less merchants take the paper which drives the "cost" of something in paper form up.

 

Problem is when your world population is 7 billion, thermo nuclear and scraping for any resource that we haven't pulled from the ground, sky or water and sipping from the same cup of energy.

 

100,000k will happen, the algo's will keep trading long after the last human stepped foot on the surface of the planet.  Well, until the nuclear plants meltdown from a lack of diesel powering the cooling systems in 80% of the legacy nuclear generation in the US.  So no worries, as the saying goes; the operation will be a success but the patient is dead.

 

Tue, 05/15/2012 - 18:45 | 2429351 ThirdWorldDude
ThirdWorldDude's picture

Thermo-nuclear doesn't match with 7 billion...

Tue, 05/15/2012 - 19:23 | 2429504 CPL
CPL's picture

http://en.wikipedia.org/wiki/Samson_Option

 

Not everyone follows the same rules of conduct.  Each country that has a nuclear stock pile all have a breaking point as well.  All countries, no one is excluded.

Tue, 05/15/2012 - 19:03 | 2429415 BurningFuld
BurningFuld's picture

They arn't using the diesel generators in the US to block the in flow of water from the ocean like they did in Japan are they?

Tue, 05/15/2012 - 19:38 | 2429534 CPL
CPL's picture

No they divert the Colorado river to provide the cooling of the rods.  The water is used to generate both the power and the cooling of the rods.  I've never had a satisfactory answer if the plants just dump it back into into the river or are they still burying it in the Arizona desert as nuclear waste.  There's probably a lake ontario buried in drums, all the fresh water should be potable in 5000 years.

Other location along the Mississippi, aka cancer alley, have been caught dozens of times over the industrialization of the area doing that plus dumping.  Got so bad in the 70's the river caught on fire.

 

In N+1 design with high availability, IT borrowed the idea btw.  The nuclear plant powers the grid and the diesel/gas generator run the water pumps because if the cooling stopped because of a severe power outage then the backup is independent of power grid and only needs to be supplied as long as there is labour/fuel to continue the operation of the cooling system.

They were also designed that way to act as a last measure defense during the cold war.  If the operators of the plant were all killed then the Nuclear plant would contaminate the surrounding area leaving it uninhabitable for anyone.  Remember, this is the cold war, it didn't have to make sense, just sound tough.  That shifted in the 70's in nuclear plant design where more options to cool the nuclear systems were built into the system because everyone understood Mutually Assurance Destruction and engineers and sciences were pushing for a less severe outcome if everyone died...modular design, compartmentalized, fail over systems.  Believe it that Japan could have been worse.  It could have been Chernobyl

 

Now here we are, running out of options.

Tue, 05/15/2012 - 22:02 | 2429969 Arnold
Arnold's picture

Cut back on the burbon Bub.

Tue, 05/15/2012 - 22:16 | 2430013 CPL
Tue, 05/15/2012 - 18:40 | 2429333 Manthong
Manthong's picture

More is always better than less. Keep picking up A.S.E.'s as you can. Consider picking up handfuls of pre-65 silver coins from the coin shop as finances allow. All is good. Two dimes should always be worth at least a gallon of gas. You really want to need a dolly to move your silver around.   

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