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Some Sobering Charts
Even a traditionally optimistic Michael Darda, of MKM Partners, is having trouble discovering the silver lining among the flotsam and jetsam that is the global macro-economic ocean currently. The Japanification theme continues with five charts offering too-correlated-to-be-ignored perspectives on equities, money supply/velocity, valuations/multiples, and demographics.
An updated chart of Japan versus U.S. equities is breathtakingly grim. This chart originally ran as a Bloomberg “Chart of the Day” back in August. The chart may tell us what is in store if eurozone policymakers fail to forestall a collapse of Italy/Spain. The ECB's reluctance to even take back the errant rate hikes imposed earlier this year—the least it could do, in our view—is not encouraging in this regard.
A high ratio of liquidity doesn’t guarantee a rise in risk assets or nominal income, as Japan has found out over the last two decades. Tightening credit markets are an ongoing threat to the velocity of money.
Low long rates have not led to higher P/E ratios in Japan. Moreover, long rates tend to move with expected nominal growth prospects, which is why they have been closely correlated to movements in equity prices over the last several years.
Like Japan, the U.S. is facing demographic challenges, albeit not to the same degree (i.e., we are not headed for negative population growth). However, the Federal Reserve Bank of San Francisco has done work on equity multiples and societal age distribution (middle-aged cohort versus the old-age cohort) and has found a stunningly close relationship that does not bode well for a rise in earnings multiples from here. Indeed, the researchers note that, “the actual P/E ratio should decline…to 8.3x in 2025 before recovering to about 9x in 2030.”
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holy bit shatman
thanks zh. beacon of light in dark times
.
this is not going to be pretty....
They live four years longer, build better cars and have cooler phones. Also have a stronger currency and better trains. But their real estate prices and equities went down... Um what was lost during the lost decade other than inflated fake bubble pricing? Their only mistake was drawing it out so slowly. Then again they do have an extra half decade each.
Plus, when their business and political leaders fuck up, there is a good chance they will commit harakiri.
Rumor has it this is extremely Bullish. While I think not, what I think matters not.
The HFTs will be determined to run the market up under instruction of the Bernanke.
They will burn shorts for that Jolly Xmas sales season to make all feel well. /sarc for sure.
Everything will be fine if we pass the turd in cheif's jobs boondoggle. Be of good cheer! Four more years!
Four more years is a little optimistic.
The issue is that yesterday it was Japan, tomorrow it will be the world.
Demographics rule - this guy's premise for several years: http://www.thegreatbustahead.com/
spam
Yes, this guy is full of hype, but demographics IS a big player in the overall scheme of things. Advisor to multiple presidents, Peter G. Peterson also predicted a turbulent future over ten years ago in his book: "The Gray Dawn". I read it several years ago and keep shaking my head in amazement as his scenarios keep playing out around the world. He predicted chaos in Japan, US, and Europe, and finally China. The Chinese demographics are the worst. Remember when tennis champ Bjorn Borg was the spokesperson for population growth in scandinavian countries ?? Some of the countries that PGP said to watch were: Spain, Italy and Scandinavia.
See: http://www.pgpf.org/
And yes PGP is full of it sometimes, but face it, the Boomers are retiring or at least buying less to save for retirement and they are the biggest voting block in the equation.
It's the "greatest unwind". Boomers grew the economy and now are starting to draw it down as they retire. Without the boomers growth, the economic growth slows. Oh, and sorry...we used up all the cheap oil too.
Sober....
Tomorrow on CNBC Neel Kashkari, (the X-Goldman Sachs employee), who with Hank Paulson engineered the 700 Billion dollar no questions asked Bailout of Goldman Sachs, AIG, JPM, Lehman, BearStearns, BAC, Morgan Stanley, and all the other banks, foreigns included has news for America.
Watch the Weasel tell Americans they must not have Social Security and Medicare, while at the same time tell Amercans that Europe needs a bazooka bailout that will be funded by: Guess Who ? America.
This guy, Neel Kashkari belongs in Jail with Lloyd Blankfein. Because what he did was pay Lloyd Blankfien's 100 million dollar bonus with that same bailout. Loyalty has no shame. This is why Goldman Sach rules the world. They get away with it.
The Fed already bailed out European banks once in 2008, you mean they are going to do it again?
You have not seen anything yet. They will funnel more money equal to the last bailout.
That's the problem: we won't see it. It will be kept off balance sheet.
Good for you jekyll island. You get it. We won't see it. But it will be done.
Occupy Wall Street has no idea who they are fighting.
JPMorgan gave the COPS, (Cheap Offending Protector Slaves), big money to hold the public at bay.
it's so insulting. they don't even seem to care that the people on the sidelines are starting to hoot at them (at this stage, really more at their apparatchiks like erin burnett and herman cain).
Duh, I thought the bailout was paid back.
ES 900 by Nov.
Correlation...Schmorelation...Japan didn't have the POMO thingy.
Japan has had ZIRP since 1999. QE since 2001. Eventually extending the program to buying equities. Everytime the Nikkei falls 1% intraday, the Government steps in and picks up some bargins.
Twelve years of Zirp and ten years of QE. Quite the success story.
Lizzy - I guess you didn't pick up on the sarcasm...I concur - it's pretty eerily similar.
Sorry. My bad ;) I should have known better.
But at least they have glowing rice. Or maybe they say it's 'growing'.
Growing lice.
Yeah we know it looks like shit, but this time it will be different.
Timmy and Ben
Yet the beat goes on.
http://www.youtube.com/watch?v=bWL4TZSodl0
the key difference is social and political. japanese are a controlled, moderate, deferential, self-negating and united nation. america is individualistic, greedy, bitchy and will blow up into civil unrest and secessions before they go through japan's experience.
No we won't! We are kind, brave, thrifty, generous, reverent, sleepy, miss the big picture sometimes, loyal, misinterpreted, sometimes confused with our government handlers by other countries, hardworking sometimes, hate lazy asses and will eventually throw out all the politicians after we have tried everything else possible.
i hope you're right. throwing out all the politicians is something the japanese certainly cannot do. but the parasites and the bankers have so much to lose. they won't let go. america will disintegrate.
I think I just spotted another former boy scout...
O'RLY?
and last but not least... WW3
You forgot the part about how Fat america is.
dupe
Dear Tyler:
You consistently try to connect an exogenous event to each inflection of equities (attempts at tying rumors to equity events).....with all due respect, it's very amusing. Mostly because per the social mood theory, all market events are a fractal that occurs at all degrees...thus, fractals project news (exogenous events) and not the other way around (per your attempts).
Would you consider the following? I will project exognous events based on Elliot Wave analysis and social mood compass:
1. We are currently in a scary rally of wave 2, which will temporarily revive the mania mood. Rumors will become even more believable...imagine that!
2. Rumors and inuendos of EU rescue will become more frequent and perhaps even tangible (maybe a Euro Tarp will bring S&P to 1275??)....further stoking the current ripfest (however, not before a retrace down of about 61% fib to near 1120).
3. Post the onset of wave 3 down, economic and political news will become very sour....Obama will become even more inept, Bernake wil be more ridiculed, Greek will actually default......this will be by early 2012......by November 2012....S&P will exceed March 2009 lows.
4. Unemployment, ISM, Fed Data, etc will all plung by March 2012....BAC will be near bankruptcy.....$2 per share?
5. What precedes exogenous events......thought, then sentiment, then event.
6. All guilt is projected...(Freud or ACIM?); all thought precedes event, all guilt, blame, fear...projected....and those who are unaware of what precedes, only see what happens as exogenous.
7. Think abstract.
Approach the ledge and step forward
I'm pretty much in agreement with everything, although #6 is a little deep for me to consider at this time of night. My only reservation is I'm not positive we're in wave 2, this could be a sub-wave correction to M3 down. I'm sitting tight until we correct this bounce, see how far down it goes before the next bounce. 1120 looks like a good number. We bounce from there and I'll get long for wave 2.
Your count is still my top count though.
I like the way you think WonderDawg. From what I saw EWI showed a much lower wave 5 down.
Which, if true, has not been reached yet.
The real thing to consider is always: When will one of the little PIGS Blow Up ??? The Banks are freezing up now.
They did show the potential for a much lower wave 5, but they also said we could be in minor 2, so Hochberg is on the fence. Another waver I follow is Daneric, and he's been calling it pretty tight for weeks now. His top count is minor 2 started this week. Lots of variables at the moment, so I'm just going to sit tight til I get a good feeling one way or the other. My gut's been getting it right lately, and it's not really saying anything at the moment.
I like Daneric too. Good Stuff.
Dear Bazooka,
If you are referring to Robert Prechter's EWI principal, remember he failed his subscribers three years in a row with bad reads.
While I do not think you are wrong because the markets are manipulated. Wave what ever does not carry water all the time.
One thing I would say is the HFT's, Mutial Funds, Hedge Funds and TPTB in the markets are really not feeling comfortable at night.
There is a lot of supply in uneasy hands wishing they could dump on any rally. Fake or Not.
That supply is why they can manipulate any single stock at any time. It is not a good time to own anything in mass.
I do agree with much that you say. Buy for the Christmas season, Right ???? I'll buy Physical Metals First.
I followed his advice in 2007 and got out of equities, saved me a bunch of money and heartache. I got back in March 2009 on his call for a bottom, and was nicely rewarded. I got out early in 2010 and missed out on some gains, but the market is pretty close to being where it was when I got out, so I call that a wash. Making good bets on the way down now, so it's working again and has been since July.
I'll take my gains over what my ex-financial guy would have done for me, and if I listened to him I'd be puking right now.
But I'll be the first to admit I wouldn't trade strictly on EW analysis. I take in a lot of info from different sources, including ZH, to compose my personal forecast. EW is one element, but I find it to be a good one for understanding the bigger picture and why news doesn't always affect the market in the manner you would expect from conventional analysis.
His models are based on humans. The computers have him beat, me thinks.
You, kind sir, are a douch-bag.
This is good stuff. What is missing is credit growth and the much overlooked impact of consumer spending by ITEM not by VALUE. Most of the data on consumer spending is raw $ when it should be # items. It strips out that Tiffany ring and iPad impulse buy. While in Japan in the 1990's I noticed that while the $ value stayed roughly the same the # items was dramatically reduced.
Ohhhhhh! The best boobies yet! Oooo Laaahhh Lahhh!
More Social Mood Projecting Exogenous Events:
1. By about 2015, Dr. Bernanke will be indicted for negligence! Guilt and fear leads to projection! So, the extreme negative social mood will need a projection of guild target...why not Bernanke!!! or Hank Paulson! Geithner....these three suicide financial bombers! Don't forget Dudley!
1.1: Perhaps, if Dr. Greenspan is still alive, he will also be hauled into Congressional hearings and court and indicted! The pissed off public will scream for the guilty! France will rejuvenate the guillotine (not physically but emotionaly)
2. Squid Face (Woe to thee: CEOs of BAC, GS, MS and Citi, Country Wide, Wamu)...you will be indicted for crimes against society (2016 or earlier?)
Your rear ends will be very un-lubed!
3. CNBC will become a Sports Channel......ha ha ha! (Cairo National Basketball Conference)
4. I will be very rich with all my fucking silver ace trades! (Better than Reggie, Tyler, MHFT, Phoenix, and every other major donater to Zero Hedge). By 2016, i will trade every fucking 10x dollar bill for gold and silver.....we must first cross the valley of deflation before hyperinflation!
5. Robert Prechter wil become a demi God....President Paul will defer to his advice! ( I don't think Paul will win until 2016)
6. Steve Hotchberg will no longer be ridculed for being so fucking wrong in not spotting the Sept. 2010 turn up!!!!! What a fucking moron he was in missing that...a fucking herder!
7. WW III will start by 2013 or a bit earlier (fuck!) My prayers to all who are about to die!
8. My family and neighbors who make fun of me for being a BEAR and BULL based on squigly elliot lines will respect me and envy my $Millions! Fuck you you fucking fucks! (except my wife)
9. Binve will apologies for his horrible calls! ( If he has the balls!)
10. All Gold Bugs will cry howls of pain as Gold goes to $490!!! Eric King will no longer "lead" his interview candidates by "ascerting" that gold and silver are still good buys (or good byes).
11. Silver bugs like Celente will retrack his shitty deals! They will genuflect to the alter of deflation before hyperinflation! Look at the fucking global, public, private and corporate debts loads! It's a fucking ponzi! debt destruction anyone?
12. Delinger will be proven right on his DOW 3k call but wrong a little later as it will beyond that to perhaps DOW 1k!
13. All economists will remain positive until S&P 500 and what a WTF moment it will be for the public with the bank runs! YOU WON"T HAVE ACCES TO YOUR FUCKING CASH!!!!
14. Cash will be king and its buying power wil increase by 10x....look at the yen!
15. At the bottom, nearly 98% of the public will know the exact meaing of DEFLATION.
16. Whe 98% know the meaning of DEFLATION: BUY EVERY FUCKING Precious Metal, equities for Largest Pharma, GE, MMM or any reliable company with dividend yield of 25% or more!
This will be 2013 (then again in 2017)
Good Luck and may those who are about to die salute the Ego emperor!
My advice is FREEEEEEEEEE! With zero price stabeeeleeetteeeee!
Way to put it out there, Bazooka. A forecast with timelines, something you don't see every day. I can't see that any of your projections are hard to imagine. I think it will be surprising and scary the degree to which the mood will sour. Fear and anger will be the dominating mood trends. Lots of implications for entertainment, fashion, politics, not to mention the economy.
Depression, bitchez.
You want to give an example of deflation during a time a war? Im all ears.
Deflation is destruction of credit. That means debt destruction....bankruptcies, soverign debt crisis...what you're seeing now.
When war breaks out...you get a destraction! Suddenly, all expenditures are re-directed to....war costs! Also, those policiticians have a new direction to project their failures.....war!
still, the tears of deflation must first be crossed....even before war! But, i will be first to not ask for money, subscription or donation on my IMHO....but rather be frist on zero hedge comments to urge everyone to PLEASE learn! Read! Analyze!
Understand that a severe econonomic and financial winter is coming.....keep cash (not money in bank but actual physical cash!), sell all your physical assets like gold and stocks. remain liquid for the mother of all buying opps are coming.
For the skilled speculators, short the S&P in and out (I use FAZ and VXX).
It's always those fucking banks!
Got to love it. I told my wife the same exact thing. It's the banks that are the problem.
It is the one thing you can count on Fucking things Up. The Banksters.
Look, I agree the markets can go down on deflationary fears, but ultimately the costs of war are expensive in real terms. They create shortages of real goods and services- and governments always inflate the money supply to support their wars. That is why I asked you to demonsrtate an example of money supply contraction during a war. The mistake you are making is thinking that the government has saved in real terms to support its war/spending. Additionally, the money supply will continue to grow due to deficit spending without any additional wars. However, we must balance this long term understanding with the short term realization that credit is contracting and banks will likely continue to default into the near future.
The increase in war expenses will be dwarfed by the level of credit destruction. They've tried to reflate the credit bubble with trillions already, and only made the problem worse and the inevitable outcome even more catastrophic.
Dear Bazooka, I don't know if it was I or someone else who struck a nerve. But I give a Kudos for these 16 points.
Pretty Good Shit to Ponder. +1 for the effort alone.
My dear Rocker:
Cash is king! Keep cash in a safe location! It will buy 10x of what it is today.
BE PREPARED! The Winter of the Kondetrieef cycle has already started! This means that 2013 should be the bottom but fuck! The interventions of Bernanke and Trichet et al have perhaps elongated the time frame to 2016 or early 2017.
The mother of all generational buying opp for you cash thats stashed will come.....wait, hold cash ( for experienced spec, go in and out). hold...hold...and when 2016 comes around.....buy allllllll Precious Metals and equiteis with dividend yiled of 25% or higher!
God Bless!
Thanks, I am ears to your thoughts. At least your honest and informed.
"The Winter of the Kondetrieef cycle"
Want to try that one again?
17 and then you woke up. Darn!
so much for the sobering!
Have one in my honor, Slewie. Make it a double.
"Bartender! Check, please. Reading these charts I'm starting to see double."
We need to hire Volker, nuke the ponzi economy from orbit wtih 15% interest rates for 2 years and start over fresh after every last overstretched borrower has defaulted and people have built up SAVINGS. We are drowning in debt and having more debt showered on top of us will never help.
Alas, that will not happen! Why? Social mood isn't ready.
Whe the student is ready, the teacher will come......Mr. Obama (NoBama to me) nor Bernanke or Yahoooi Turbo Geithner...not ready!
I noticed you left out zombies. When will the zombies walk?
At some point it will correct itself
Again, if the worst outcome the u.s. experiences is japanification, the country should consider itself damn lucky. Lets see, over the lost decades that japan has had--strong real estate markets, high savings rates, large export market, low crime rates, efficient public transportation, tech savvy citizenry, healthier lifestyle....wow, sounds bad....america, get down on your knees and pray for a japanese outcome...
+1 kito Just remember, it was not good for the stock market. Which is why many of us are on Zero Hedge to begin with.
"Left hand translate": The downward acceleration will be swift!
We are there....wave 1 of Major 3 ended this week, wave 2 up should take us to 1260 S&P and after that, go short or cash!. What a show it'll be until Dec. 2012. S&P 400 anyone?
I agree. (No knees, though.)
the similarities between the US/Japanese charts are where we are headed
i'm looking for a ramp into 2012, and then the start of a huge drop
the only question is will bernanke let the Dow drop back to 1000 or will he proceed with QE infinite to prop up the markets
Bernanke was panicking through 2008 and 2009....do you really think he knows what he's doing? Everyone of his predictions has fallen flat!
He follows the market! The market does not follow Bernanke! This is the secret!
Think! Think for yourself! Step back......think! Reason! or stay safe and keep cash.....nothing wrong with cash! Have you seen the 30 yr? It'll retrace but fuck! I expect 30 yr treasuries to go sub 2% at height of deflation! The dollar is the reserve currency and there will be no alternative for a while!
The above charts simply illustrate you can't print your way to prosperity. The more manipulated the markets, the less stable thus less investment money flows in. Not rocket science. If people think they can't ever win, they take their ball and go home.
Oh crap. I looked at the sobering charts and now I'm sober. I'll have to go back in
the kitchen and mix another pitcher of rum and gingerbeer. What a waste of good alcohol.
Beat me to it...
Let's face it, Sobriety Is Bad!
Pass the rum.
"Another pitcher of rum and ginger beer."
Dark and Stormy, bitchez...
To be had on a beautiful nantucket eve...
Or after setting anchor in the port of Hamilton Bermuda, completeing a fun little sail from Block Island.... having had winds on a broad reach and slipping into the elbow of the gulf stream.... a well earned dark and stormy (or two or four, ahhh hell who counting)
World facing worst financial crisis in history, Bank of England Governor says
By James Kirkup
10:00PM BST 06 Oct 2011
The world is facing the worst financial crisis since at least the 1930s “if not ever”, the Governor of the Bank of England said last night.
http://www.telegraph.co.uk/finance/financialcrisis/8812260/World-facing-...
I said here since 09: Japan is best case scenario.
That's because when Japan bubble burst there was ongoing massive demand for Japanese products while raw material costs were still low (crude was less than one quarter the current price). Margins were high, revenues were rising and competition was still limited in key industries. GDP kept growing, whereas US GDP post bubble has been in the tank. Japanese personal income growth was maintained whereas in the US it has started to go into reverse as of August 2011.
US today has none of those luxuries. Only a printing press that's getting squeaky.
Not saying as long as you. But for a long time now after thinking things out.
My favorite thing to say, "We are Worse than Japan Now". And yes, I firmly believe it.
This is honestly a pretty stupid analysis... not only do the timelines not match among charts, but even on the first two individual charts, the two series cover different timelines. Those two tricks give you total control over how the charts look - you can make them look however you want, so they are worthless.
There's something stupid on this page, but it's not the charts.
Take a wild guess
Worthless charts? I wouldn't say that, but "Those two tricks give you total control over how the charts look" -- thanks for pointing that out. Most of us are suckers for charts. Good to inject some common sense. Question, when is a trendline actually and exponential curve? Ans. This can happen on a sufficiently long semi-log chart--take 20 yr gold chart, for instance.
The first world will japanify.
The third world, parts of it, will grow.
EWZ...you will thank me for it in five to ten years.
Japan was taken over by a small cadre of billionaire power brokers in the late 80s and the result is just what we're seeing happening in the U.S. today. A small group of billionaires sucking the life out of the system.
Malinvestment. Where is our $1.4 trillion deficit going?
99 weeks unemployment. 47 million on food stamps. War in Iraq. War in Afghanistan. War in Libya. War in Yemen. War in Pakistan. SSI. Medicaid. Teacher salary boost from $55,000 to $60,000. Fed employee union salary boost. State and local union employee salary boost. 2% cut in SS taxes. Interest appears to be cheap, but when the Fed is holding 30 year notes bought at 2% and yielding 14%, the spot won't look pretty.
Net-net: train wreck in slow motion.
ecession chances in the USA are 100% q1 2012-2014. I undertook little exercise to create:
Prediction chart of US debt max, default time, haircut,inflation
Its explained in more detail here:
http://saposjoint.net/Forum/viewtopic.php?f=14&t=2626&p=34423#p34423
All in all, US debt will reach 21 TRILLION USD in early 2016 at default. Taking into account GDP 2011 = GDP 2010 (14,7 trillion USD) and 4% /year recession 2012-2015, the ratio DEBT/GDP may be close to 170-180%. In any case, >150%. That is a bit higher than the ratio Greece had in 2010 ( 140%) which prompted bailout from EU and IMF to avoid immediate default. No one is able to bailout the USA in 2016.
Haircut will be between 50-75% in 2017-2018, so inflation roughly 25% a year. In 2016-2018, not earlier. This corresponds to USDX long term prediction chart (2012-2018) made here:
http://saposjoint.net/Forum/viewtopic.php?f=14&t=2626&st=0&sk=t&sd=a&sta...
and as related to it, but made earlier and independently, long term ( 2012-2018) EUR/USD rate prediction chart made here:
http://saposjoint.net/Forum/viewtopic.php?f=14&t=2626&st=0&sk=t&sd=a&sta...
so everything fits wiht deflationary recession in the USA q1 2012-end of 2014.
AND inflation in EUR zone with recession at the same period. Starting NOW, but surely in 2012.
Ivars, while I find your analysis interesting, I couldn't help but notice that you use astrology in making your predictions. Presumably, therefore, you are a believer in astrology. The trouble I have with that is the same trouble I have with Elliot waves. Everything depends on "interpretation"--the random element that ruins the whole analysis. Even if you have a whole string of correct predictions, that will not validate your approach.
Here is some sobering news from Japan, if you are financially able you may be looking for possible emigration destinations for your children and grand-children in hopes that they will live and find health and prosperity elsewhere in this world.
Sadly for most in this world Fukushima was news for a few days this past spring, and no news at all for many more.
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