Five Reasons the Market Could Crash This Fall 194 comments
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With all this blather about “green shoots” and economic “recovery” and new “bull market,” I thought I’d inject a little reality into the collective financial dialogue. The following are ALL true, all valid, and all horrifying…
Enjoy.
1) High Frequency Trading Programs account for 70% of market volume
High Frequency Trading Programs (HFTP) collect a ¼ of a penny rebate for every transaction they make. They’re not interested in making a gain from a trade, just collecting the rebate.
Let’s say an institutional investor has put in an order to buy 15,000 shares of XYZ company between $10.00 and $10.07. The institution’s buy program is designed to make this order without pushing up the stock price, so it buys the shares in chunks of 100 or so (often it also advertises to the index how many shares are left in the order).
First it buys 100 shares at $10.00. That order clears, so the program buys another 200 shares at $10.01. That clears, so the program buys another 500 shares at $10.03. At this point an HFTP will have recognized that an institutional investor is putting in a large staggered order.
The HFTP then begins front-running the institutional investor. So the HFTP puts in an order for 100 shares at $10.04. The broker who was selling shares to the institutional investor would obviously rather sell at a higher price (even if it’s just a penny). So the broker sells his shares to the HFTP at $10.04. The HFTP then turns around and sells its shares to the institutional investor for $10.04 (which was the institution’s next price anyway).
In this way, the trading program makes ½ a penny (one ¼ for buying from the broker and another ¼ for selling to the institution) AND makes the institutional trader pay a penny more on the shares.
And this kind of nonsense now comprises 70% OF ALL MARKET TRANSACTIONS. Put another way, the market is now no longer moving based on REAL orders, it’s moving based on a bunch of HFTPs gaming each other and REAL orders to earn fractions of a penny.
Currently, roughly five billion shares trade per day. Take away HFTP’s transactions (70%) and you’ve got daily volume of 1.5 billion. That’s roughly the same amount of transactions that occur during Christmas (see the HUGE drop in late December), a time when almost every institution and investor is on vacation.
HFTPs were introduced under the auspices of providing liquidity. But the liquidity they provide isn’t REAL. It’s largely microsecond trades between computer programs, not REAL buy/sell orders from someone who has any interest in owning stocks.
In fact, HFTPs are not REQUIRED to trade. They’re entirely “for profit” enterprises. And the profits are obscene: $21 billion spread out amongst the 100 or so firms who engage in this (Goldman Sachs (GS) is the undisputed king controlling an estimated 21% of all High Frequency Trading).
So IF the market collapses (as it well could when the summer ends and institutional participation returns to the market in full force). HFTPs can simply stop trading, evaporating 70% of the market’s trading volume overnight. Indeed, one could very easily consider HFTPs to be the ULTIMATE market prop as you will soon see.
TAKE AWAY 70% of MARKET VOLUME AND YOU HAVE FINANCIAL ARMAGEDDON.
2) Even counting HFTP volume, market volume has contracted the most since 1989
Indeed, volume hasn’t contracted like this since the summer of 1989. For those of you who aren’t history buffs, the S&P 500’s performance in 1989 offers some clues as what to expect this coming fall. In 1989, the S&P 500 staged a huge rally in March, followed by an even stronger rally in July. Throughout this time, volume dried up to a small trickle.
What followed wasn’t pretty.
Anytime stocks explode higher on next to no volume and crap fundamentals you run the risk of a real collapse. I am officially going on record now and stating that IF the S&P 500 hits 1,000, we will see a full-blown Crash like last year.
3) This Latest Market Rally is a Short-Squeeze and Nothing More
To date, the stock market is up 48% since its March lows. This is truly incredible when you consider the underlying economic picture: normally when the market rallies 40%+ from a bear market low, the economy is already nine months into recovery mode. Indeed, assuming the market is trading based on earnings, the S&P 500 is currently discounting earnings growth of 40-50% for 2010. The odds of that happening are about one in one million.
A closer examination of this rally reveals the degree to which “junk” has triumphed over value. Since July 10th:
- The 50 smallest stocks have outperformed the largest 50 stocks by 7.5%.
- The 50 most shorted stocks have beaten the 50 least shorted stocks by 8.8%.
Why is this?
Because this rally has largely been a short squeeze.
Consider that the short interest has plunged 72% in the last two months. Those industries that should be falling the most right now due to the world’s economic contraction (energy, materials, etc.) have seen the largest drop in short interest: Energy -90%, Materials -94%, Financials -86%.
In simple terms, this rally was the MOTHER of all short squeezes. The fact that it occurred on next to no volume and crummy fundamentals sets the stage for a VERY ugly correction.
4) 13 Million Americans Exhaust Unemployment by 12/09
A lot of the bull-tards in the media have been going wild that unemployment claims are falling. It strikes me as surprising that this would be true given the fact that virtually every company that posted the alleged “awesome” earnings in 2Q09 did so by laying off thousands of employees:
- Yahoo! (YHOO) will cut 675 jobs.
- Verizon (VZ) just laid off 9,000 employees.
- Motorola (MOT) plans to lay off 7,000 folks this year.
- Shell (RDS.A) has laid off 150 management positions (20% of management).
- Microsoft (MSFT) plans to lay off 5,000 people this year.
So unemployment claims are falling, that means people are finding jobs right? Wrong. It means that people are exhausting their unemployment benefits. When you consider that there are 30 million people on food stamps in the US (out of the 200 million that are of working age: 15-64) it’s clear REAL unemployment must be closer to 16%.
And they’re slowly running out of their government lifelines.
The three million people who lost their jobs in the second half of 2008 will exhaust their benefits by October 2009. When you add in dependents, this means that around 10 million folks will have no income and virtually no savings come Halloween.
Throw in the other four million who lost their jobs in the first half of 2009 and you’ve got 13 million people (counting families) who will be essentially destitute by year-end.
How does this affect the stock market?
The US consumer is 70% of our GDP. People without jobs don’t spend money. People who are having to work part-time instead of full-time (another nine million) spend less money than full time employees. And people who are forced to work shorter work weeks (current average is 33, an ALL TIME LOW), have less money to spend.
Wall Street makes a big deal about earnings (earnings estimates, earnings forecast, etc), but when it comes to economic growth, sales are the more critical metric. Companies can increase profits by reducing costs temporarily, but unless actual top lines increase, there is NO growth to be seen. No revenue growth means no hiring, which means no uptick in employment, which means greater housing and credit card defaults, greater Federal welfare (unemployment, food stamps, etc), etc.
So how will corporate profits perform as more and more consumers become part-time, unemployed, or destitute? Well, so far profits have been awful. And that’s BEFORE we start seeing millions of Americans losing their unemployment benefits.
click to enlarge
With the S&P rallying on these already crap results… what do you think will happen when reality sets in during 3Q09?
5) The $1 QUADRILLION Derivatives Time Bomb
Few commentators care to mention that the total notional value of derivatives in the financial system is over $1.0 QUADRILLION (that’s 1,000 TRILLIONS).
US Commercial banks alone own an unbelievable $202 trillion in derivatives. The top five of them hold 96% of this.
By the way, the chart is in TRILLIONS of dollars:
As you can see, Goldman Sachs alone has $39 trillion in derivatives outstanding. That’s an amount equal to more than three times total US GDP. Amazing, but nothing compared to JP Morgan (JPM), which has a whopping $80 TRILLION in derivatives on its balance sheet.
Bear in mind, these are “notional” values of derivatives, not the amount of money “at risk” here. However, if even 1% of the $1 Quadrillion is actually at risk, you’re talking about $10 trillion in “at risk.”
What are the odds that Wall Street, when allowed to trade without any regulation, oversight, or audits, put a lot of money at risk? I mean… Wall Street’s track record regarding financial instruments that were ACTUALLY analyzed and rated by credit ratings agencies has so far been stellar.
After all, mortgage backed securities, credit default swaps, collateralized debt obligations… those vehicles all turned out great what with the ratings agencies, banks risk management systems, and various other oversight committees reviewing them.
I’m sure that derivatives which have absolutely NO oversight, no auditing, no regulation, will ALL be fine. There’s NO WAY that the very same financial institutions that used 30-to-1 leverage or more on regulated balance sheet investments would put $50+ trillion “at risk” (only 5% of the $1 quadrillion notional) when they were trading derivatives.
If Wall Street did put $50 trillion at risk… and 10% of that money goes bad (quite a low estimate given defaults on regulated securities) that means $5 trillion in losses: an amount equal to HALF of the total US stock market.
This of course assumes that Wall Street only put 5% of its notional value of derivatives at risk… and only 10% of the derivatives “at risk” go bad.
Do you think those assumptions are a bit… low?
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This article has 194 comments:
Yes without program trading there likely would have been no bid during the crash and the country could now be in Great Depression II. However the liquidity added by HFTP insured there was a bid, thereby propping the market up long enough to for us to try and fix it. And while some people claim to think this is a bad thing, I just smell 'short' when I see articles like this.
The bottom line if the banks are manipulating the market, they are doing so to save themselves, the world economic system, and the rest of us to boot, almost certainly in that order.
Nothing to do but buy the banks and sit tight.
And if they don't then a war is coming to realign the political and economic world. Its easy to see, deficit spending on the military to pull out of an economic malaise is a time honored tradition right out of Imperial Japan or Nazi Germany and all the way back to the Roman emperors.
In which case, buy defense, sit tight.
Now that's fear mongering!
Take a wild guess how that was received.
He stated trading desks have made their money on the upside.
Now they will not be able to make such large sized gains here and the programs will be taking it to the downside and when they do it will be a violent sell off.
The idea was greeted with total bemusement.
October will tell the tale the key is not being the fish that got hooked.
LOL... Fortunately, when you wrote this, you followed Rule #1 of economic predicting: If you give them the price, don't give them the timing!
Deficit Government spending is trying to fill the missing consumer portion of the GDP, a pothole patch at best, while banks buy US Treasuries to keep the scam going. Oil is up to $70bbl, the Dollar is trending downward from it's unsustainable and bewildering highs and yet inflation is still 'tamed'. Strange, that $4 extra value meal is now $5 thanks to the 70 cent per hour hike in the minimum wage. I hear the echos of the first President Bush with the words "there's no recession." We'll see if the magicians can keep things together into 2010 or if the audiance sees through the smoke and mirrors.
Can you provide #'s & PY comparatives on your volume argument?
See dshort.com/articles/20...
On Aug 04 11:26 AM Angel Martin wrote:
> What market ever had a crash that was not preceeded by a multi-year
> bull/bubble gains?
1. Goes up on bad news/numbers from MSFT, AMZN, AXP's poor numbers results couple of weeks ago.
2. The investment gurus and analysts who got blind sided by last fall's fall and March low (boy weren't they pessimistic) are now in unison as bullish as ever, even with heck of a run since March.
3. Bears are hiding and appear to be capitulating on short covering. One can say the bears were "early" smart money.
4. Russell 2k has been on a tear. Speculation or back to halcyon days are back?
5. CNBC has special on Dow 9k and Cramer is pounding the table with buys and the lemming retail and professional investors are piling in. So much for the lows we had in Oct/Nov and March.
6. And even Barron's sounding bullish sans Abelson?
7. Historically Sept is the worst month followed by Oct. Just around the corner.
My 2-cents is that we'll see 50% retracement to March low in Sept/Oct.
Any one particular Wall Street firm can lose everything they have or even more,but other Wall Street firms would earn the same amount at the same time,as they are on both sides of those derivative positions. Alltogether "Wall Street" can not lose money on their derivatives...
Zero Hedge: "Most interesting is the correlation between Money Market totals and the listed stock value since the March lows: a $2.7 trillion move in equities was accompanied by a less than $400 billion reduction in Money Market accounts!
Where, may we ask, did the balance of $2.3 trillion in purchasing power come from? Why the Federal Reserve of course, which directly and indirectly subsidized U.S. banks (and foreign ones through liquidity swaps) for roughly that amount. Apparently these banks promptly went on a buying spree to raise the all important equity market, so that the U.S. consumer who net equity was almost negative on March 31, could have some semblance of confidence back and would go ahead and max out his credit card. Alas, as one can see in the money multiplier and velocity of money metrics, U.S. consumers couldn't care less about leveraging themselves any more."
So, the magical "Green Shoots" stock market rally was fueled by a mere $400 billion from the money markets. The rest ($2.3 trillion) was main-lined into the market via Bernanke's quantitative easing (QE) program, of which Krugman and others speak so highly.
Wouldn't you like to know if Bernanke sat down with G-Sax and JPM executives and mapped out the details of this swindle before the printing presses ever started rolling?
On Aug 04 12:10 PM contracontrarian wrote:
> "If Wall Street did put $50 trillion at risk… and 10% of that money
> goes bad (quite a low estimate given defaults on regulated securities)
> that means $5 trillion in losses: an amount equal to HALF of the
> total US stock market."
>
> Any one particular Wall Street firm can lose everything they have
> or even more,but other Wall Street firms would earn the same amount
> at the same time,as they are on both sides of those derivative positions.
> Alltogether "Wall Street" can not lose money on their derivatives...
Long : DBC, with a 10% stop loss.
Long: SPY puts
Long: TBT
This charade can't last forever.
On Aug 04 08:23 AM JosephN wrote:
> Wow, the fear mongering in this article is palatable.
>
> Yes without program trading there likely would have been no bid during
> the crash and the country could now be in Great Depression II. However
> the liquidity added by HFTP insured there was a bid, thereby propping
> the market up long enough to for us to try and fix it. And while
> some people claim to think this is a bad thing, I just smell 'short'
> when I see articles like this.
>
> The bottom line if the banks are manipulating the market, they are
> doing so to save themselves, the world economic system, and the rest
> of us to boot, almost certainly in that order.
>
> Nothing to do but buy the banks and sit tight.
>
> And if they don't then a war is coming to realign the political and
> economic world. Its easy to see, deficit spending on the military
> to pull out of an economic malaise is a time honored tradition right
> out of Imperial Japan or Nazi Germany and all the way back to the
> Roman emperors.
>
> In which case, buy defense, sit tight.
>
> Now that's fear mongering!
> Over at Zero Hedge, Tyler Durden did the math and figured that the
> recent 45% surge in the S&P 500 had nothing to do with the fictional
> economic "recovery", but was just more of the Fed's hanky panky.
>
> So, the magical "Green Shoots" stock market rally was fueled by a
> mere $400 billion from the money markets. The rest ($2.3 trillion)
> was main-lined into the market via Bernanke's quantitative easing
> (seekingalpha.com/symbo...) program, of which Krugman and
> others speak so highly.
>
> Wouldn't you like to know if Bernanke sat down with G-Sax and JPM
> executives and mapped out the details of this swindle before the
> printing presses ever started rolling?
Ya know, if y’all would just leave this “too difficult for you to understand” economic wizardry to the professionals and tune back into GE’s market watch programming, we’d all be better off. “You want Truth?! You can’t handle the Truth!!!” Or is it “If you’re selling crazy go next door, we’re all filled up here”?
OR market could go up despite this with the Federal Reserve & its Quantitative easing.
Its NOT about reading into financial statements, doing your homework...
Game is rigged more than ever
On Aug 04 01:44 PM TwiceShy wrote:
> So how do you win when the game is rigged in favor of those who own
> the table? I think the answer is that you stop playing.
There is and always has been far too much corruption in the markets. That is why there are millions of dollars of fines being paid every day with no admission of innocence or denial, in itself another form of corruption supported by the "system".
As long as we have State supported and protected Corporate corruption, the markets shall remain far more treacherous to the small investor than they truly should be, and to an increasing degree, unacceptably so.
So step up ,place your chips and spin the Big Wheel as you wish, you just might hit it lucky.
Heck I do not know what is going to happen, but if one has an investing plan and sticks to it, one can make money in the market (and no I do not mean a plan that includes anything that the liars on CNBC, or the mutual funds, et al, have to say).
I have always believed that to be to bearish or to bullish is very dangerous. Leaning to far to one side will hurt you, a lot.
I must apologize for the following repetitive statements: When the S & P finally cracks, when the run up fueled by IB's using tax payer money is over, the average American MUST be ready to act.
The average American MUST not listen to CNBC or the financial media. The MUST not let them take a parking space in their heads for they are ALWAYS dead wrong and have no accountability for the things they say.
Dear average mom and pop American:
You buy stocks when nobody wants them. When the fear is high and you are being told to get out of stocks by the very people who kept telling you to buy them the entire way down!! That is when you take your shopping list to the store and buy companies that you have been wanting to buy for years.
I have no idea where this market goes. All i know is that I have a long term plan in place, and there are companies who's shares I would like to buy. I will buy them when the S & P falls back to its 25 year continuation trend line of about 750. Just like I did back in the spring, when CNBC finally capitulated and said the world was coming to an end.
I will not buy them while people on CNBC are declaring the recession over and while they collect their million dollar pay checks, regardless if they are 100% dead wrong or not.
On Aug 04 01:34 PM Dave Wrixon wrote:
> Now what was it you said America makes these days?
seekingalpha.com/artic...
Good luck to all.
The problem is, small individual investors (such as myself) have no choice but to play 'Wall Street Roulette'. If I don't put my money in, all of my value is quickly eroded by inflation destroying my earnings. I have made recent efforts to avoid the game trough bullion investing, and that gives me some peace of mind.
My best strategy for negotiating the current rally was to get in just like everyone else, and to not be afraid to regularly take some profits. I am trying to make a gentle exit from this market; I never trusted the rally, but now I fear it.
On Aug 04 02:48 PM SeekingTruth wrote:
> Whether the market crashes in the Fall or not, the established modus
> operandi of the markets will still be in place, and as such, it shall
> remain "The Big Casino in the Sky".
> There is and always has been far too much corruption in the markets.
> That is why there are millions of dollars of fines being paid every
> day with no admission of innocence or denial, in itself another form
> of corruption supported by the "system".
> As long as we have State supported and protected Corporate corruption,
> the markets shall remain far more treacherous to the small investor
> than they truly should be, and to an increasing degree, unacceptably
> so.
> So step up ,place your chips and spin the Big Wheel as you wish,
> you just might hit it lucky.
the largest amount of cash to stock market assets in history to say
a few points...oh yeah here is another one economy performing better than
adverse stress test scenarios...could go on and on....
I would also think that between the baby boomers, retirees, and close retirees would pull out of the market and never look back once they get back a decent portion of the vast wealth that they have lost over the last two years. Because of this, I cannot imagine a V recovery - but more of a crash burn and a decade or two slow recovery. I just took advantage of this rally and put our 401(k)s into case today. I would rather give up 20% gains than see 50%+losses at this time.
On Aug 04 11:55 AM doubleshortetf wrote:
> Why we're near the very top:
>
> 1. Goes up on bad news/numbers from MSFT, AMZN, AXP's poor numbers
> results couple of weeks ago.
>
> 2. The investment gurus and analysts who got blind sided by last
> fall's fall and March low (boy weren't they pessimistic) are now
> in unison as bullish as ever, even with heck of a run since March.
>
>
> 3. Bears are hiding and appear to be capitulating on short covering.
> One can say the bears were "early" smart money.
>
> 4. Russell 2k has been on a tear. Speculation or back to halcyon
> days are back?
>
> 5. CNBC has special on Dow 9k and Cramer is pounding the table with
> buys and the lemming retail and professional investors are piling
> in. So much for the lows we had in Oct/Nov and March.
>
> 6. And even Barron's sounding bullish sans Abelson?
>
> 7. Historically Sept is the worst month followed by Oct. Just around
> the corner.
>
> My 2-cents is that we'll see 50% retracement to March low in Sept/Oct.
Credit Suisse 1.30% 2.00%
"bull-tards" or Soothsayer?
Getting Stronger: Economists Raise Third-Quarter GDP Forecasts:
Deutsche Bank AG 0.00% 2.00%
J.P. Morgan 2.50% 3.00%
Moody’s Economy.com 1.10% 1.60%
Morgan Stanley 1.00% 3.50%
UBS 2.00% 2.50%
Wells Fargo 2.20% 3.00%
Average 1.44% 2.51%
blogs.wsj.com/economic.../
I get the sense that you're nothing but bizarro-world equivalents of the CNBC cheerleaders. One side is pump, pump, pump while the other is dump, dump, dump.
I lightened the US equity portion of my portfolio this week, but am still 40% US equities. When we go back down to S&P 700-800, I'll sell some treasuries and corporates to buy more US equities.
It's really not that hard.
The economy runs on this...else why do we bother?
"Animal spirits
The colourful name that keynes gave to one of the essential ingredients of economic prosperity: confidence. According to Keynes, animal spirits are a particular sort of confidence, "naive optimism". He meant this in the sense that, for entrepreneurs in particular, "the thought of ultimate loss which often overtakes pioneers, as experience undoubtedly tells us and them, is put aside as a healthy man puts aside the expectation of death". Where these animal spirits come from is something of a mystery. Certainly, attempts by politicians and others to talk up confidence by making optimistic noises about economic prospects have rarely done much good.
www.economist.com/rese..."
1) We had HFP and the market went down 55%. That makes the elimination of it a non-issue. HFP didn't save the market from crashing and the elimination of it will not make the market crash.
2) We are seeing a disconnect between the domestic economy and corporate earnings. It's irrelevant to the market if 13 million Americans are unemployed if corporate earnings are soaring due to having streamlined costs and making gobs of money internationaly. A stronger domestic economy would help, naturally, but it doesn't necessarily mean that a punk consumer will tank corporate earnings.
3) This is not just a short squeeze. This is a global move higher in reaction to better than expected corporate earnings. I wasn't bullish on the market until I saw the market reacting to better than expected earnings by buying instead of selling on the news. That sure woke me up.
While this may be the mother of all rallies in the context of a secular bear market, I believe this has another 10-15% higher over the next year before the secular bear rears it's ugly head again.
The derivatives numbers are off...C alone has 200 trillion, yet, the world has not come to an end...most of those positions are hedged currency bets.
I think retail sales will do the trick, and yeah, there's nothing fundamental at all holding this rally together at this point...pure momentum. Fundamental investors pushed this market up from March lows, and now that technical indicators like the XXX day moving averages have passed resistance, momentum will drive this rally off a cliff.
I've had a great run, but it's time to hedge my bets. Here's my SA take on this winter:
seekingalpha.com/artic...
dshort.com/charts/bear...
I agree that we may not recover from the bear for a long time. In general the deeper a bear, the longer the recovery period (to the previous high) and this bear was the second meanest of all.
www.scribd.com/doc/180...
On Aug 04 06:34 PM Alphameister wrote:
> Significantly hedged as of today, but wondering if I acted too soon
> after reading all the pessimism in this post and the comments it
> elicited. Up 110% ytd through investment/trading in Chinese stocks
> that have gone from about 4-5 times earnings (and a discount from
> book value) on average to 8-9 times higher and rising earnings,
> plus a handful of U.S. techs and biotechs that have also delivered
> gains that annualize to several hundred percent. Talk about irrational
> gains all you want, but this value and growth investor feels like
> a kid in a candy store even after the best rates of gain I've ever
> experienced. I see dozens of stocks that deserve to be trading 50%
> to 100% higher right now based on relatively conservative fundamental
> analysis.
On Aug 04 06:34 PM Alphameister wrote:
The S&P 500 is above a 1,000. If it doesn't crash, what will be your penalty? Will you admit that your premises are incorrect?
The game, for most investors, is to profit through capital allocation(stock selection), not predicting economy.
By the way, I am curious about the data on "70% of market volume" of HFTP. It would be great to indicate source.
Not a single economic argument. More data came out today - also good. We are in recovery. Economy is growing. Q3 will see +2% to 4%. Q4 will also be good. Here's a tip. Pay attention to back to school. As goes BTS - so (mostly) goes Q4 retail. It will be a nice tell. Earnings are growing. Inflation is low. Earnings drive the market and you are going to see very nice sequential growth in Q3 and Q4. In 2010 the Q on Q compares will be good.
That is what is driving the rally. We will see some pullbacks but we are heading higher. Recovery will be "v" shaped. the issue now is will it be "V" or "v'
That's all.
On Aug 04 10:49 PM FB5000 wrote:
> Remarkably wrongheaded. I actually feel sorry for you.
>
> Not a single economic argument. More data came out today - also good.
> We are in recovery. Economy is growing. Q3 will see +2% to 4%. Q4
> will also be good. Here's a tip. Pay attention to back to school.
> As goes BTS - so (mostly) goes Q4 retail. It will be a nice tell.
> Earnings are growing. Inflation is low. Earnings drive the market
> and you are going to see very nice sequential growth in Q3 and Q4.
> In 2010 the Q on Q compares will be good.
>
> That is what is driving the rally. We will see some pullbacks but
> we are heading higher. Recovery will be "v" shaped. the issue now
> is will it be "V" or "v'
>
> That's all.
>
>
I like your #3 comment about "...Bears are early smart money...". It came across as a rare refreshing and astute remark.
The Bears in time will turn their double barrel shorting guns at the poor investors when they have finished up with the covering.
TK
On Aug 04 11:55 AM doubleshortetf wrote:
> Why we're near the very top:
>
> 1. Goes up on bad news/numbers from MSFT, AMZN, AXP's poor numbers
> results couple of weeks ago.
>
> 2. The investment gurus and analysts who got blind sided by last
> fall's fall and March low (boy weren't they pessimistic) are now
> in unison as bullish as ever, even with heck of a run since March.
>
>
> 3. Bears are hiding and appear to be capitulating on short covering.
> One can say the bears were "early" smart money.
>
> 4. Russell 2k has been on a tear. Speculation or back to halcyon
> days are back?
>
> 5. CNBC has special on Dow 9k and Cramer is pounding the table with
> buys and the lemming retail and professional investors are piling
> in. So much for the lows we had in Oct/Nov and March.
>
> 6. And even Barron's sounding bullish sans Abelson?
>
> 7. Historically Sept is the worst month followed by Oct. Just around
> the corner.
>
> My 2-cents is that we'll see 50% retracement to March low in Sept/Oct.
Recall last year June-July 2008 timeframe, the financial media was still saying "...no recession for this year..." and "...market is holding up and not capsizing...". (Of course, don't forget, they are paid to write, unlike SA folks here).
Early in 2008 I recall Benny was still saying after several of those emergency rate cuts, and the government's May Stimulus, "...Everything is going to be fine...". I hope people's memory are not short.
Now, of late, the Newsweek Magazine front cover declared that the "recession is over". This really worries me. Don't you see a correlation here with what I said earlier above? The fact they (like Sir Alan again, oh my gosh, not him again) could go out and say that it is over, it ain't over until it is over.
Street smart is what I always rely upon. In my neighborhood, which supposedly is very strong economically compared with most, my nearby supermarket is closing down, my nearby post office is cutting out after 5 services, those empty twin-tower new gleaming office buildings on the highway where every morning I pass by on my way to work are still hollow and dark, as it had been since late 2008, some folks I know at my church are still waiting for their bosses to call them to come back to work when work becomes available... the list goes on...
It doesn't look very "recovery" as yet. Maybe some folks at or around the Hill are living in Nirvana.
Unemployment - look at seasonally adjusted inital claims - that is the only piece of data that matters at the moment. Payroll data will matter next year - when it gose positive and the fed tightens - time to sell.
Look at housing stats - tat tells youmore. The mortgage default story was news in 2006 and 2007 it is priced in now.
Commercial property. Not sure. could be bad but look at the way REITS are acting - I have been nibbling all year and continue to do so. Being careful - but more than a few have raised capital this year and that is a good sign. Could be safe to go all in soon.
That's all
On Aug 04 11:19 PM Freefalling wrote:
> Actually, these are just clarifications and a summary of much of
> what is already common knowledge. There are a number of issues which
> still haven't been mentioned: 3T in bad commercial property loans.
> Bankrupt CA and other states (that's not fixed yet). Alt-A mortgages
> being recast to ~500B. Millions underwater, delayed foreclorsures.
> Do you argue the unemployment figures? Inflation is not low--real
> buying power is diminished, although some deflationary demand-destruction
> effects are visible. Currency destruction--not demand-pull inflation.
> Quantitative easing is not the same as economic recovery. We've had
> stock collapses in 1987, 1989, 1990, 1993, 1997. 2000, 2003, 2007-2008-2009.
> There is no way the average investor has the information to protect
> himself from the crashes. What makes you think YOU know there WON'T
> be one now? Jim Cramer tell you? Brilliant!
On Aug 04 11:26 AM Angel Martin wrote:
> What market ever had a crash that was not preceeded by a multi-year
> bull/bubble gains?
Whole Foods sales and profit grow in 3Q
A company like Whole Foods does NOT grow sales in a recession. Premium produce? In a recession?
This issue led the market down - it bottomed las November at about $9.
On Aug 04 11:19 PM Freefalling wrote:
> Actually, these are just clarifications and a summary of much of
> what is already common knowledge. There are a number of issues which
> still haven't been mentioned: 3T in bad commercial property loans.
> Bankrupt CA and other states (that's not fixed yet). Alt-A mortgages
> being recast to ~500B. Millions underwater, delayed foreclorsures.
> Do you argue the unemployment figures? Inflation is not low--real
> buying power is diminished, although some deflationary demand-destruction
> effects are visible. Currency destruction--not demand-pull inflation.
> Quantitative easing is not the same as economic recovery. We've had
> stock collapses in 1987, 1989, 1990, 1993, 1997. 2000, 2003, 2007-2008-2009.
> There is no way the average investor has the information to protect
> himself from the crashes. What makes you think YOU know there WON'T
> be one now? Jim Cramer tell you? Brilliant!
Whole Foods sales and profit grow in 3Q
A company like Whole Foods does NOT grow sales in a recession. Premium produce? In a recession?
This issue led the market down - it bottomed last November at about $9. I don't own it. But I watch it plus some others. For me it is a window into consumerland. The middle to upper middle class. This indicator is not flashing worsening recession.
That's all.
On Aug 04 11:19 PM Freefalling wrote:
> Actually, these are just clarifications and a summary of much of
> what is already common knowledge. There are a number of issues which
> still haven't been mentioned: 3T in bad commercial property loans.
> Bankrupt CA and other states (that's not fixed yet). Alt-A mortgages
> being recast to ~500B. Millions underwater, delayed foreclorsures.
> Do you argue the unemployment figures? Inflation is not low--real
> buying power is diminished, although some deflationary demand-destruction
> effects are visible. Currency destruction--not demand-pull inflation.
> Quantitative easing is not the same as economic recovery. We've had
> stock collapses in 1987, 1989, 1990, 1993, 1997. 2000, 2003, 2007-2008-2009.
> There is no way the average investor has the information to protect
> himself from the crashes. What makes you think YOU know there WON'T
> be one now? Jim Cramer tell you? Brilliant!
we shall see... although i'm quite bearish ... i wouldn't make such statement .... maybe u r trying your luck ... make a prediction and hoping that it will come true and then u become famous?
On the article as a whole and after reading every single comment here and comments on other articles across the last month i see the market retracting in sept if not late august based on the fear of Sept/Oct alone, see once the fear money pulls out in anticipation of a pullback the bullish indicators will no longer be thereby causing a domino effect once the bad news comes in sept and the longs switch to shorts. How many people here will be keeping their current positions through Sept i wonder.
Myself i wont be switching to shorts but i will be pulling out of the market over the next month and then begining a patient watching process. I have no problem admitting i am fearful of sept/oct and feel that i wont miss out hugely if i (and the majority of others) are wrong about the coming pullback.
Either way good luck all and happy trading :)
Thats right we are all in short, puts and silver and as we stated no insurance.
We will commit Zero at this time and not go long again until we see how many babies where actually conceived during this unemployment crises and what kind of consumer they will be in 10 years.
We do expect this leg of the 18 year cycle to be Zero returns with many extreme events mostly of witch will not support any growth.
If you read Bernanke's quotes over the last 6 years or so, he's been wrong about everything. What makes people think he's right now?
This is a government-financed rally -- the government paid, the tax-payers footed the bill, and Goldman Sachs benefited. Is this what they mean by 'pillage and burn'? We've been pillaged. When do we burn?
On Aug 04 12:24 PM conceptwizard wrote:
> Over at Zero Hedge, Tyler Durden did the math and figured that the
> recent 45% surge in the S&P 500 had nothing to do with the fictional
> economic "recovery", but was just more of the Fed's hanky panky.
> Durden noticed that the money that's been sluicing into stocks hasn't
> (correspondingly) depleted the money markets. That's the clue that
> led him to the truth about Bernanke's 6 month stock rally.
>
> Zero Hedge: "Most interesting is the correlation between Money Market
> totals and the listed stock value since the March lows: a $2.7 trillion
> move in equities was accompanied by a less than $400 billion reduction
> in Money Market accounts!
>
> Where, may we ask, did the balance of $2.3 trillion in purchasing
> power come from? Why the Federal Reserve of course, which directly
> and indirectly subsidized U.S. banks (and foreign ones through liquidity
> swaps) for roughly that amount. Apparently these banks promptly went
> on a buying spree to raise the all important equity market, so that
> the U.S. consumer who net equity was almost negative on March 31,
> could have some semblance of confidence back and would go ahead and
> max out his credit card. Alas, as one can see in the money multiplier
> and velocity of money metrics, U.S. consumers couldn't care less
> about leveraging themselves any more."
>
> So, the magical "Green Shoots" stock market rally was fueled by a
> mere $400 billion from the money markets. The rest ($2.3 trillion)
> was main-lined into the market via Bernanke's quantitative easing
> (seekingalpha.com/symbo...) program, of which Krugman and
> others speak so highly.
>
> Wouldn't you like to know if Bernanke sat down with G-Sax and JPM
> executives and mapped out the details of this swindle before the
> printing presses ever started rolling?
On Aug 05 03:31 AM expat in China wrote:
> Our team has Zero Hedge!
>
> Thats right we are all in short, puts and silver and as we stated
> no insurance.
>
> We will commit Zero at this time and not go long again until we see
> how many babies where actually conceived during this unemployment
> crises and what kind of consumer they will be in 10 years.
>
> We do expect this leg of the 18 year cycle to be Zero returns with
> many extreme events mostly of witch will not support any growth.
No one I've read has commented on another of Greenspan's comments from his ABC appearance on Sunday. He specifically stated that the rebound in the stock market to the tune of 3 trillion dollars off the lows was in and of itself a positive economic development contributing to a positive wealth effect.
Bottom line: a 50% move off the bottom on declining volume in the face what looks like an "L" shaped recovery, not a "V," sets us up for a violent correction. I have been one "place order" keystroke away from buying out of the money index puts a couple of times, stopped only because I want to see the first high volume down day first.
funny question
You're spot on... we're headed for some nasty times... just don't know about the timing.. or how long the charade can last...
Maybe Bernie can help us keep this ponzi scheme going for a few more years..
On Aug 04 07:10 PM reveigel@msn.com wrote:
> Just for a start, let's say that all five reasons are wrong. What
> is in the wings that will start us flying again? Cap & Trade?
> Expensive new health care bill? Higher energy costs? Higher taxes?
> Higher unemployment? Larger National debt? Green energy programs?
> Higher interest rates? Less 'real' energy programs? More unemployment
> benefits? More government interference and control? More deficit
> spending budgets? Greater mileage requirements for cars and trucks?
> And there are more. And none are encouraging to start us flying again.
so here's the thing. no one data point tells the whole story. to see forward you need to think creatively and dig around. some stuff is obvious and other stuff is harder to see.
what you don't want to do is focus on the wrong indicator at this stage e.g. Friday payroll data will most likely be bad and people will get into a tizzy over it. but it is not meaningful at the moment because it says very little about the future
Or
data that is old - like Q2 GDP that had umpteen articles devoted to it around here and which is like "BFD yes it is still negative" - the most interesting thing about the data was that it is trending strongly positive and this was ignored by the geniuses on SA.
Or
garbage like the stuff the author is spouting.
I read SA for the amusement value only. I post but only to help people. If you want Alpha - you will not find it here. Most of these dudes are lucky if they keep pace with the market.
On Aug 05 03:08 AM soulcharisma wrote:
> fb5000 im not saying your comments are invalid but in addition do
> them dont you ever think its possible that Whole Foods is up because
> people are eating out less. In theroy People are eating out less
> because of the recession which in turn means that they are eating
> at home more, followed by learning more about home food/cooking and
> maybe instead of being willing to spend $40 on a meal out are making
> a $40 meal by making it at home spending $25....just because people
> arent eating out dosent mean they arent eating quality products especially
> with america becoming more calorie and quality of food concious.
> Just a passing thought
>
> On the article as a whole and after reading every single comment
> here and comments on other articles across the last month i see the
> market retracting in sept if not late august based on the fear of
> Sept/Oct alone, see once the fear money pulls out in anticipation
> of a pullback the bullish indicators will no longer be thereby causing
> a domino effect once the bad news comes in sept and the longs switch
> to shorts. How many people here will be keeping their current positions
> through Sept i wonder.
>
> Myself i wont be switching to shorts but i will be pulling out of
> the market over the next month and then begining a patient watching
> process. I have no problem admitting i am fearful of sept/oct and
> feel that i wont miss out hugely if i (and the majority of others)
> are wrong about the coming pullback.
>
> Either way good luck all and happy trading :)
Over the years, I have seen the Mexican crisis, the Asian crisis, the Russian crisis. Then Enron and the crashes of last year. A Chinese correction could be leading us into the next bear cycle.
Unless something is not done none soon to stop this. This is worse then that as these people are the very ones creating this & they want to cull the population by 80%.
Why the vaccinations , why the military on the strets why the 600 Fema concentration camps. Look around, the people creating this crash are orchestrating the total demise unless you put a stop to it. Do not support these people in the market. Like the drug companies & these evil bankers.
Unfortunately, the Casino and the rampant corruption within our government may have just destroyed our Nation.
If you can NOT see that you are blind.
There are NO valid arguments for this behavior or those within our government which have tolerated it.
On Aug 04 08:23 AM JosephN wrote:
> Wow, the fear mongering in this article is palatable.
>
> Yes without program trading there likely would have been no bid during
> the crash and the country could now be in Great Depression II. However
> the liquidity added by HFTP insured there was a bid, thereby propping
> the market up long enough to for us to try and fix it. And while
> some people claim to think this is a bad thing, I just smell 'short'
> when I see articles like this.
>
> The bottom line if the banks are manipulating the market, they are
> doing so to save themselves, the world economic system, and the rest
> of us to boot, almost certainly in that order.
>
> Nothing to do but buy the banks and sit tight.
>
> And if they don't then a war is coming to realign the political and
> economic world. Its easy to see, deficit spending on the military
> to pull out of an economic malaise is a time honored tradition right
> out of Imperial Japan or Nazi Germany and all the way back to the
> Roman emperors.
>
> In which case, buy defense, sit tight.
>
> Now that's fear mongering!
On Aug 04 04:01 PM imagtek wrote:
> There is more liquidity in the form of fiat currencies than there
> is planetary capacity to provide resources in response to liquidity
> flows without trashing the climate, etc. We have already exceeded
> any sustainable carrying capacity for this planet, and so-called
> 'economists' still talk of 'growth'. There is going to be an inevitable
> global collapse of all fiat currencies relative to commodities (global
> hyperinflation). None will escape. The global economy is the Titanic
> and we are short quite a few lifeboats. It is going to get nasty.
It's easier to just sit back and ignore the possibility of another stock market melt down. The Sept.-Oct time frame tends to be a bearish season, so taking profits before the fall seems prudent.
Let common sense guide you.
As soon as mainstream investor sentiment realizes this, we'll see a sharp short-term plunge exacerbated by big-money / smart-money taking advantage of the move.
#2 If this market rally is a Short-Squeeze, so be it. It is welcomed for the harm naked shorts have caused. The second part of "price discovery" has to happen at some time, and its called a Short-Squeeze!
What we have here are many people walking a field of time bombs only seeing how pretty the flowers are!
People have to eat! Food is the last personal gift people are able to give themselves. Aldi's Foods is doing very well, too. Both ends of the food spectrum can exist profitably in this economic downturn based upon one's income bracket.
Smith and Hawken has closed its doors completely after 30 years serving the middle and upper class garden crowd. Remember, gardening is the nation's number one hobby, and this quality business is completely finished!
There is a dramatic shrinkage in this economy that will NOT be coming back. It is over, folks. Many of these jobs are NOT coming back.
The data in this article is in-your-face data, but there appears to be several who don't want to face it. The recovery is an illusion. Credit card debt, which is fueling summer spending continues to balloon.
The derivative debt continues to be the elephant in the room. It cannot be ignored. It has to be written down eventually. Huge losses are in sight.
eye-on-washington.blog...
On Aug 04 08:23 AM JosephN wrote:
> Wow, the fear mongering in this article is palatable.
>
> Yes without program trading there likely would have been no bid during
> the crash and the country could now be in Great Depression II. However
> the liquidity added by HFTP insured there was a bid, thereby propping
> the market up long enough to for us to try and fix it. And while
> some people claim to think this is a bad thing, I just smell 'short'
> when I see articles like this.
>
> The bottom line if the banks are manipulating the market, they are
> doing so to save themselves, the world economic system, and the rest
> of us to boot, almost certainly in that order.
>
> Nothing to do but buy the banks and sit tight.
>
> And if they don't then a war is coming to realign the political and
> economic world. Its easy to see, deficit spending on the military
> to pull out of an economic malaise is a time honored tradition right
> out of Imperial Japan or Nazi Germany and all the way back to the
> Roman emperors.
>
> In which case, buy defense, sit tight.
>
> Now that's fear mongering!
First, no byline. Without a source, how can we judge the credibility of the argument?
Second, no citation of sources in the data, especially the derivatives chart.
Third, the companies whose revenues and profits he lists in the table are all highly levered companies with substantial fixed costs. It's a given that their profits will decline more rapidly than revenues.
I'm not saying that the article is completely without merit. However, if the author is careless with his presentation, how can we be assured he's meticulous in his knowledge? Good attempt at frothy fearmongering, but that's the limit to what this article really accomplishes.
BANKS SHOULD NOT BE PERMITTED TO TRADE - GS will eventually get it's hat handed to it - calls for probes are mounting - the money they 'make' is stealing from society. Hiding behind 'providing liquidty' is total BS and disrupts markets.
It's not all a zero sum game.
Look at that Dow chart 1929 to 1933. Things were looking better in early '33 and then the bottom fell out. We have a perfect storm brewing that COULD repeat history.
Pride comes before the fall. Continue to challenge your premises!
On Aug 04 12:10 PM contracontrarian wrote:
> Alltogether "Wall Street" can not lose money on their derivatives...
I agree, the times ahead will be "interesting"!
On Aug 05 10:02 AM Ted Kavadas wrote:
> Interesting article, with many valid points...
I don't doubt the trends you see but your view is becoming increasingly closed. There is a real possibility of a pullback in the coming months. That has been guiding my strtategy since I caught the trader" bug. It's not a lunatic fringe opinion. I think there are a lot of people looking at the easy returns they have made this summer and are getting conservative. the institutions may prevent it from happening or they may wait until 2010 to really get long.
I respect your opinion but the high horse resonance of your posts is getting old fast.
With the Fed and WH putting out money like drunk sailors, don't fight the trend. Only bad news will derail this rally. Short term trend is long, but Sept-Oct may be as far as this rally can go w/o a correction.
Enjoy the ride. Long term-there is hell to pay for all the debt created.
Now can someone please tell me why this man is CHASING THE DARK CLOUDS BEHIND THE SILVER LINING?
Yes the market is going to crash ......... some day.
We all are going to die .... some day. Why not live until we die?
'cause we're trying to make money while we're still alive?
Also, what they fail to mention is that many of the derivative could actually be collapsed or consolidated... so $1B long and $1B short = Net Zero. Basis risk only comes into play on held for sale and non-cash accounting.
news.yahoo.com/s/ap/20...
I expect a big crash, either in the fall or the winter, because neither sales or earnings are going to rise to the level needed to justify the valuations.
The wheel keeps on turning, where it stops everybody knows(but no one tells).
On Aug 04 02:48 PM SeekingTruth wrote:
> Whether the market crashes in the Fall or not, the established modus
> operandi of the markets will still be in place, and as such, it shall
> remain "The Big Casino in the Sky".
> There is and always has been far too much corruption in the markets.
> That is why there are millions of dollars of fines being paid every
> day with no admission of innocence or denial, in itself another form
> of corruption supported by the "system".
> As long as we have State supported and protected Corporate corruption,
> the markets shall remain far more treacherous to the small investor
> than they truly should be, and to an increasing degree, unacceptably
> so.
> So step up ,place your chips and spin the Big Wheel as you wish,
> you just might hit it lucky.
Have we foregotten how the manipulated market blew up that head and shoulders chart that trapped the bears just two weeks ago?
I am going to ride this rally some more and switch to inverse index investments the moment incipient panic surfaces.. But only then.
Soros out gunned the Bank of England but Benranke (sic) is trying to outgun the Gazillion deriviatives looming disaster. Will even the privately owned Fed be able to pick the American pockets for another 10 trillion dollars - plus compounding interest? If not, not only the market will crash but also the senators, congresspeople and the house of cards they have built in lieu of a sound government. No, I take that back. As it collpases Congress will award itself golden parachutes in the form of gold drawn to their accounts from Fort Knox.
But now I fear that succesful inverse investments I am waiting to pull the trigger on won't be honored when the big players and Congress evanesce into the mist.
On Aug 05 09:32 AM Clarence Beeks wrote:
> Buy Gold and Precious Metals to protect yourself AND to make nice
> gains in the process. You heard it from me 10 years ago and I'm
> still telling anyone who cares to know. If you look back on the
> past 10 years it easy to see that with all the current liquidity
> pumped into the Central Banks that the ONLY sane investment is Gold
> and Precious Metals. Protect yourself.
it's easier to predict doom & gloom.
As regards derivatives, there are three sides to a contract- a winner, a loser, and a market-maker. The problem is when the loser can't stand behind their side of the bet, the winner has leveraged up his potential winnings, and massive deleveraging then ensues. The market-maker watches the market collapse, along with his profits, and all this angst transfers to the broader market.
There are a few ways to counter this, though. The first is to give the losers some time to pay or spot them some cash to the extent they've been caught in an unexpected liquidity trap. The second is to increase liquidity by every possible mechanism, including buying down interest rates, devaluing currency to make debt cheaper, increasing money supply and bank availability to make loans. The third is to prosecute the defaulting losers to the extent there is fraud or negligence (hi there, ratings agencies!). The fourth is to regulate and wind down some of the leverage.
The problem with your scenario is that all this is in the works, and the crisis has been averted (for the time being, for sure). The shorts, who were betting on the end of the world, see their bets could go the wrong way (and are being forced to deal with it)- creating a short squeeze as you say.
The question to me is- will the currency devaluate and labor and energy costs fall so our companies can go back to export leadership and compete globally, or will we attempt protectionism, cap and trade, and propping up the dollar? If the former, then eventually your scenario will play out as our leading companies never regain their global mojo. If the latter (and the political winds seem to be blowing against Obamanomics), then it's very possible that global growth can resume and earnings will resume their first decade of this millenium march forward.
I can't promise a Dow back at 14,000, but I wouldn't bet the farm against it...
Great work, keep it up!
crudeoiltrader.blogspo...
Even at 1/2 of today's prices , GE Enterprise Value will still be priced at 18x EBITDA . Who in the world would pay 18x EBITDA in this economic environment ?
-------------------
Don't Get Massacred !
gudovac1941.blogspot.com/
So how can you quote them on the positive side?
On Aug 04 05:30 PM Dan Kieffer wrote:
> Analyst Q3 - Prev. Q3 - Revised
> Credit Suisse 1.30% 2.00%
> "bull-tards" or Soothsayer?
> Getting Stronger: Economists Raise Third-Quarter GDP Forecasts:<br/>D...
> Bank AG 0.00% 2.00%
> J.P. Morgan 2.50% 3.00%
> Moody’s Economy.com 1.10% 1.60%
> Morgan Stanley 1.00% 3.50%
> UBS 2.00% 2.50%
> Wells Fargo 2.20% 3.00%
>
> Average 1.44% 2.51%
> blogs.wsj.com/economic.../
1. Summer will be over - people will be getting back into the markets.
2. Programmed trading doesn't cause a worst-case problem spelling financial Armageddon.
3. Rapid dollar devaluation attracts investors abroad whose currency has been beaten up slightly less.
4. The annual earning reports for Q3 and Q4 '09 are markedly better than the 40% drop one year ago. This is good news that the herd will follow.
5. The dose of morphine (stimulus) to the economy (to kill pain) is substantially increased. Nurses (investors) know the patient (US economy) is brain dead, but the surgeon (Fed) insists that his novel procedure saved the patient's life.
6. Through quantitative easing, the Fed continues to directly manipulate banks and indirectly manipulate the markets in a positive way.
7. People fighting the US economy by purchasing commodities start chasing resources that are not there. Large corrections in commodities occur.
8. IMF continues to squash gold. Equities surge as an alternative.
9. Big money owning large shares of precious metals periodically take profit, causing gold to drop -10% every quarter. Big money knows the only way out is gold, so they take profits whenever they need a new car, vacation, villa etc.
10. Good Karma catches up with the US economy, the planets become aligned preventing the sky from falling, and those retiring in 10-20 years who focus on well-run US companies with proven substantial earnings do well.
If you have a better source! Please state it here for everyone!
"only knowledge applied is power"
On Aug 05 09:12 AM Broxburnboy wrote:
> Where have you been... there is already a "war" going on and it it
> has been financed through cutting taxes for the rich.. i.e. borrowing
> from our global rivals in our children's name. That credit is now
> drying up and we'll have to cancel social security or dilute our
> existing dollars to ensure windfall profits for the war industry.
>
FYI: I "called the crash" specifically on June 3rd, 2008 (after sending out warnings of its imminence for over a year); in July, 2008 I also called tops on oil ("will hit $20 before $200" when it was over $140; oil should hit the $20 target in November, 2012) and gold (to $399, I haven't bothered to estimate a date).
Personally I don't understand why the exchanges are continuing to pay for order flow since the game has become "make a lot of trades in order to get as much order flow payment as possible", so I can definitely see a day when they stop doing that, in which case the HFPT might slow down quite a bit.
Either way, cybernetics has changed the game forever: every recovery will be more JOBLESS than the last, the "financial resource distribution" system is broken for good, and everything everyone "knows" about government and economics is of the same veracity as "Santa leaves the presents under the tree on Christmas Eve".
The plan to fix it all is on my classmates.com profile page under "alan jacquemotte".
It doesn't do any good to say "the market is wrong". We have to face recognise it is what it is.
Great article except I don't understand why "institutional participation returning to the market in full force would cause HFTPs to simply stop trading" .... the two are unrelated ....
Best,
Rant and Rave
I have seen a lot in my investment career - since 1981. What I am seeing right now is that the average investor, as represented by the commenters, have learned NOTHING.
They actually believe the CNBC kool-aid that an economic recovery and a new bull market has started in the US.
This may be true elsewhere in the world, but not here in the US. Nothing has changed, except that the government has done two things - they have put band-aids over the major economic wounds (which will not hold long) and they have gamed the system even more in favor of the casino owners on Wall Street.
On Aug 05 01:21 PM Hmm?! wrote:
> Cutting taxes for the rich? The bottom 47% of the population pays
> no net tax. Look it up.....taxfoundation.org
>
> If you have a better source! Please state it here for everyone!<br/>"only
> knowledge applied is power"
“...no citation of sources in the data, especially the derivatives chart ...“
For the eye popping numbers see Comptroller of the Currency report www.occ.treas.gov/ftp/...
Certain comments in the report are strange, as if simply copy/pasted from older versions, without updating or taking into account recent events. Or did I lose my reading skills?
Excerpts from OCC s 1 Q 09 report:
"...The notional value of derivatives held by U.S. commercial banks increased $1.6 trillion in the first quarter, or 1%, to $202.0 trillion..."
"...Derivatives activity in the U.S. banking system is dominated by a small group of large financial institutions. Five large commercial banks represent 96% of the total industry notional amount and 83% of industry net current credit exposure..."
"...because the highly specialized business of … derivatives transactions requires sophisticated tools and expertise, derivatives activity is concentrated in those institutions that have the resources needed to be able to operate this business in a safe and sound manner..."
Note balois: Yep, safe and sound like AIG and the small group of large financial institutions! Laugh, cry or run for the hill?
"...The notional amount of a derivative contract is a reference amount...but it is generally not an amount at risk …"
Note balois: Until a counterparty loses, goes belly up, then it is “generally” quite possible, as we now know, that notional is not so notional after all.
"...Credit risk in derivatives differs from credit risk in loans due to the more uncertain nature of the potential credit exposure..."
Note balois: That is comforting news. Sub-prime, move over.
"...in most derivatives transactions...the credit exposure is bilateral...banks do not know, and can only estimate, how much the value of the derivative contract might be..."
Note balois: See OCC report table page 3. Why are the Gross Positive Fair Values always greater than the Gross Negative Fair Values as reported by the banks and totaled by the OCC!?! Where are all the counterparty suckers with the Negative Fair Value billions making up the difference when all this is supposed to be a zero sum game? Sorry, I beg your pardon: “banks do not know and can only estimate..."
Have a good day
1. All downturns show a double bottom due to the natural way of supply and demand. This one has yet to show this.
2. Look at chart from 1938 and nasdaq now - exact repica so far. If you project 1938 data, it did go through a second correction about 4-6 months after first peak to create a bottom.
3. So much promotional falsehood being spread by corporates+government about the financial status (they can not afford another downturn, nor do the people), it creates a bubble in market like now.
On Aug 04 08:04 AM Doom Bloggers s**** wrote:
> Keep spewing your doom and gloom. Dr. Rube would be so proud.
The market is us and that's what most never understand, and we have trained ourselves for the past several decades to believe we are genuises and can beat the market but my guess is that the market is about to beat all of us...senseless.
All the collective actions are geared to buy time: avoid marking down assets, raise capital, etc. I doubt there's enough time.
1) To prove himself correct (his ego rules his opinions and emotions as can be read between the lines of his fear-monger based article); and
2) To buy into the market at lower prices.
First of all, Mr. Summers contention that HFTP make up %70 of market volume is absurd. And I challenge you directly, Mr Summers to show us the data/proof of this claim. Also, no matter how many times you slice and dice a 15,000 share order, when all is said and done, it is still 15,000 shares that have traded hands. Yes, there is some back-and-forth microsecond trading going on, but no to the tune of %70 - give me a break, Mr Summers, this claim is ludicrous and unsupportable.
Secondly, yes, the CDS world is a potential time bomb, that could easily wipe out some very large financial entities (ala AIG). But the 1 Quadrillion dollar amount is another figure that Mr. Summers must provide real proof of - outside of pulling it out of his ass. Again, Mr Summers, I challenge you to provide substantiating proof of your claim to the notional amount of CDS's slinking around the world. Further, Mr Summers, in his best "doom and gloom" fear inducing logic, conveniently forgets the "exchange" effect of monies paid out under credit default swaps (one entity gains what the other pays - nothwithstanding the muliple liabilities of a default swap sold multiple times, as did AIG).
Thirdly, Mr Summers, must be very new to the market, or is simply trying to re-style the market as a follower, as opposed to its historical function as a leading indicator. Green shoots may be difficult to see, and very delicate, but change always begins in small ways - everything cycles, from high to low and all there is in-between. So as to make this correction seem unreal/aberrational (which is impossible for a market to be as it is the sum of real numbers), Mr. Summers states the correction run-up is the greatest "short squeeze" of all time; this again shows Mr Summers inability to understand markets. Yes, short covering is a factor of any reversal, but the real tales of markets are "Oversold" and "Overbought"- these conditions are inevitably corrected. No one can argue that when the Dow went from 14,000 to 6,500 it was not Oversold - but many would not touch the market at 6,500 with a 100 ft. pole, only because they were "afraird". - only those who had the nerve, and a clear understanding of market dynmaics were able to overcome their fear (emotions) and put money into the market. Mr Summers, is/was not one of these clear, unemotional, thinkers.
Yes, the market may have come "too far too fast", but who is the judge of that - certainly not Mr. Summers. In this article, Mr. Summers is emotionally, and egotistically venting - he sat, and sat, and sat and watched the market rise, and rise, and rise, and now he is pissed, knows he missed the boat, and just can't admit he was wrong. So, Mr. Summers, takes out his pen, and says "I'll show the world I am right - I'll put the fear of God into anyone that is buying into this market - and by golly I WILL BE RIGHT ! ! ! " - just watch the market crash after "they" ( Mr Summers thinks his article will reach and affect everyone) read MY article".
Poor Mr Summers, you really ought to keep your emotions in check. The market does not care about your crying, and your doom and gloom, it just does its thing, Up and Down, This Way, and That Way, and no matter how much you wish/want it one way or the other, it will do what it does, regardless of you.
Sure, the market may retrace much of or all of its gains since March 9, 2009; I don't know what it will do. But I sure as hell don't think I am so knowing, and nor am I so afraid of the "boogie man" that I sit frozen in indecision, convinced that "I am right - and the damned market is wrong".
As the market moves, a smart man moves with it.
GLTA
AckerInvesting
.
I forgot to add point #8 and #9:
8. Low volume on recent rally in last month or so despite program trading. Volume proceeds price. Lack of volume on follow-thru to S&P 1k and Nas 2k portend downside ahead.
9. Lowry’s Buying Power Index nudges record 1933 low. Few breadth studies are as insightful as those provided by Lowry Research since 1931.
"The key to Lowry’s is not the absolute level of its Buying Power Index. It’s the relationship between Buying Power and Selling Pressure. The span between declining Buying Power and rising Selling Pressure hit a 78-year record distance of 807 on July 8. The wider the span, the more bearish the situation.”
www.investmentpostcard.../
On Aug 04 11:36 PM Teutonic Knight wrote:
> doubleshortetf - - -
>
> I like your #3 comment about "...Bears are early smart money...".
> It came across as a rare refreshing and astute remark.
>
> The Bears in time will turn their double barrel shorting guns at
> the poor investors when they have finished up with the covering.
>
>
> TK
The problem is IMHO, unemployment is the least of our worries. Wall Street lives and dies on growth, and growth of any kind (outside of the recent S&P activity) is hard to find. Now that the recession is over, people will have to live in a slow-to-no-growth 'recovery' environment, and that is not at all friendly to stocks. The bull's best argument is that things are getting less bad, and may flatten out in the future for some time. What people are not realizing is that this is actually a bearish argument.
Just wait for the euphoria of the fundamentals rally from Oct-Mar to wear off, and you'll see nothing to cheer about in the near future.
On Aug 05 06:56 PM Kimball Corson wrote:
> How many of these bears here are really growling now simply because
> they are mad at themselves for missing the stock market bottom last
> March? They still cannot adjust. This is not to say, however, there
> will not be corrections along the way, some of them perhaps substantial,
> but not even Dr. Doom is all doom and gloom on the economy. No one
> sensible is, especially those who understand unemployment is a trainling
> economic indicator because employment is usually the last thing to
> turn around in an economic recovery.
In my mind, there are three groups of people in the world: SAVERS, SPENDERS and INVESTORS / SPECULATORS. SAVERS put money into CDs, savings accounts, etc., refrain from leverage and focus on living within their means. The Fed and the U.S. Government are essentially saying f*** you to SAVERS by keeping short-term interest rates artificially low. Monetary and fiscal policy is unfairly skewed to the benefit of SPENDERS and INVESTORS / SPECULATORS. These groups can borrow cheaply (at the expense of SAVERS) to finance their consumption (SPENDERS) and to boost the value of their investments (INVESTORS / SPECULATORS). Much of the growth, consumption and investment returns since the early '80s was due to increasing amounts of leverage. The U.S. will not return to steady, sustainable, long-term until Fed and Governmental policies are equally fair to SAVERS, SPENDERS and INVESTORS / SPECULATORS.
On Aug 04 12:10 PM contracontrarian wrote:
> "If Wall Street did put $50 trillion at risk… and 10% of that money
> goes bad (quite a low estimate given defaults on regulated securities)
> that means $5 trillion in losses: an amount equal to HALF of the
> total US stock market."
>
> Any one particular Wall Street firm can lose everything they have
> or even more,but other Wall Street firms would earn the same amount
> at the same time,as they are on both sides of those derivative positions.
> Alltogether "Wall Street" can not lose money on their derivatives...
1. Greed
2. Wall Street
3. Banksters
4. Politicians
5. Lack of Guillotines
i agree w/you that the market these days is a fast train and you need to figure out which way it's going before you jump on. but this "analyst" was wrong (as are most). you can't predict this market, so why try? the only thing you have control of is your investing timeframe, the longer you have the more aggressive you can be. end of story.
On Aug 05 05:40 PM Fred Voetsch wrote:
> The stock market may crash or it may not but it will likely crush
> a lot of people both long and short along the way. We were warned
> by some very smart people (Louise Yamada comes to mind) that wealth
> distruction is what is coming and to really do the job properly we
> have to be dealt with emotionally; the market will go up 50% and
> just when everyone jumps on board, scared to miss the runup the market
> falls. The market falls like a rock and just when everyone jumps
> aboard those double-short ETF's it reverses course and bulls ahead.
>
>
> The market is us and that's what most never understand, and we have
> trained ourselves for the past several decades to believe we are
> genuises and can beat the market but my guess is that the market
> is about to beat all of us...senseless.
I also don't agree with your apocalyptical scenario in the unregulated derivatives market although clearly last year it was indeed an issue of concern. When the Feds started marching into the banking industry in early 2008, they will have had a good view of the derivatives problem so is there any reason why they wouldn't have got to work immediately to contain the problem? Twelve months down the road today, there must be less risk in the derivatives market than there was last September, don't you agree?
I think the genuine potential market killers in your article have to be sustained unemployment and economic contraction but again, the government has already demonstrated its willingness to bankrupt itself to save its economy, appease the population and generally do whatever it takes to prevent a collapse of the system. If they continue to meet problems with assorted financial handouts, and this seems to be the format of their remedial action all round, it's the dollar that eventually will take the hit and it's possibly where the fireworks will come from. How will it affect the stock market and when? How will it affect foreign stock markets? how will global leaders collaborate to cushion the impact and patch up the problem? No one can possibly know this ahead of time...
*funding for this comment provided by the Obama Administration
The SEC was the greatest failure under "paper pusher" Chris Cox.
Under Cox, we had: no regulation of naked shorts, mark to market, elimination of uptick rule, no investigation of Bernie Madoff and numerous other crooks.
And now Cox works for a Newport Beach law firm. He is not qualified to prepare a dog license application.
On Aug 04 02:48 PM SeekingTruth wrote:
> Whether the market crashes in the Fall or not, the established modus
> operandi of the markets will still be in place, and as such, it shall
> remain "The Big Casino in the Sky".
> There is and always has been far too much corruption in the markets.
> That is why there are millions of dollars of fines being paid every
> day with no admission of innocence or denial, in itself another form
> of corruption supported by the "system".
> As long as we have State supported and protected Corporate corruption,
> the markets shall remain far more treacherous to the small investor
> than they truly should be, and to an increasing degree, unacceptably
> so.
> So step up ,place your chips and spin the Big Wheel as you wish,
> you just might hit it lucky.
I also feel your being a tad pessimestic. Theres no denying its been a huge rally and yeah i think we are due to see a pull back in Oct but not to the levels your predicting.
Its a fact that all investors have made a bad call and lost money at one point (anyone who tells you otherwise is lying!!) but the key is to have a strategy and stick to it. Use a stop loss wether actual or mental and diversify your holdings.
I am officially going on record now and saying ''Mark my words we will see more money made in this current climate than any other time during our lives'' just dont bet the ranch . . . YET
I'd like to see the source of the derivatives numbers. It is a scary looking number on the face of it.
I'd like to see the source of the derivatives numbers. It is a scary looking number on the face of it.
On Aug 04 12:10 PM contracontrarian wrote:
> "If Wall Street did put $50 trillion at risk… and 10% of that money
> goes bad (quite a low estimate given defaults on regulated securities)
> that means $5 trillion in losses: an amount equal to HALF of the
> total US stock market."
>
> Any one particular Wall Street firm can lose everything they have
> or even more,but other Wall Street firms would earn the same amount
> at the same time,as they are on both sides of those derivative positions.
> Alltogether "Wall Street" can not lose money on their derivatives...
On Aug 04 12:10 PM contracontrarian wrote:
> Any one particular Wall Street firm can lose everything they have
> or even more,but other Wall Street firms would earn the same amount
> at the same time,as they are on both sides of those derivative positions.
> Alltogether "Wall Street" can not lose money on their derivatives...
Stop using scare tactics like your old pal GWB. That fooled many people then not now.
The March low did not make sense and the run-up of market indexes is in large part a correction of the stupidity.
ps The people w\the bad grammar and spelling are killing me, some posts were very hard to read.
On Aug 04 03:25 PM Archman Investor wrote:
> After reading the article I almost wanted to run outside, spend a
> few days digging a shelter, pour the concrete, stock it, and hide.
>
>
> Heck I do not know what is going to happen, but if one has an investing
> plan and sticks to it, one can make money in the market (and no I
> do not mean a plan that includes anything that the liars on CNBC,
> or the mutual funds, et al, have to say).
>
> I have always believed that to be to bearish or to bullish is very
> dangerous. Leaning to far to one side will hurt you, a lot.
>
> I must apologize for the following repetitive statements: When the
> S & P finally cracks, when the run up fueled by IB's using tax
> payer money is over, the average American MUST be ready to act.<br/>The
> average American MUST not listen to CNBC or the financial media.
> The MUST not let them take a parking space in their heads for they
> are ALWAYS dead wrong and have no accountability for the things they
> say.
>
> Dear average mom and pop American:
> You buy stocks when nobody wants them. When the fear is high and
> you are being told to get out of stocks by the very people who kept
> telling you to buy them the entire way down!! That is when you take
> your shopping list to the store and buy companies that you have been
> wanting to buy for years.
>
> I have no idea where this market goes. All i know is that I have
> a long term plan in place, and there are companies who's shares I
> would like to buy. I will buy them when the S & P falls back
> to its 25 year continuation trend line of about 750. Just like I
> did back in the spring, when CNBC finally capitulated and said the
> world was coming to an end.
> I will not buy them while people on CNBC are declaring the recession
> over and while they collect their million dollar pay checks, regardless
> if they are 100% dead wrong or not.
Initial Jobless claims is Bill Gross's favorite data point for good reason - predicts what the fed is going to do - not what has already occured.
There are some good points throughout the discussion - especially Tyler Durben's. Liquidity or lack of liquidity is why the market seems to move up and down irrationally. Sell when the liquidity is withdrawn - not when a price target is reached.
On Aug 05 12:17 AM FB5000 wrote:
> Pay attention.
>
> Unemployment - look at seasonally adjusted inital claims - that is
> the only piece of data that matters at the moment. Payroll data will
> matter next year - when it gose positive and the fed tightens - time
> to sell.
>
> Look at housing stats - tat tells youmore. The mortgage default story
> was news in 2006 and 2007 it is priced in now.
>
> Commercial property. Not sure. could be bad but look at the way REITS
> are acting - I have been nibbling all year and continue to do so.
> Being careful - but more than a few have raised capital this year
> and that is a good sign. Could be safe to go all in soon.
>
> That's all
On Aug 06 02:47 PM AuGod! wrote:
> In a nutshell: This is a debt driven rally - Remember that your Dollars
> are government debt - government is also a direct investor in the
> general markets these days - large private investors are on the sidelines
> - the economy is shrinking - consumers are squeezed - unemployment
> will rise with slowing demand - demand will shrink with growing unemployment
> - credit defaults will grow - lenders will not lend - institutional
> investors are playing "doomed minions" with small investors money
> = a vicious circle for the economy. The rot which began at the top
> will not be purged but will be paid for by everyone beneath. Look
> out below! We can always laugh it off if hopes for the best materialize.
> It could get very ugly if you are not prepared for the worst.
Less people lost their job last month. Nevertheless, it is still a loss. We need to see a rise in employment and this is not going to happen to-morrow. There will be a long convalescence period, hence stagnation. I will be sitting on cash mainly and will do so before the end of August
On Aug 06 11:42 PM Kimball Corson wrote:
> This thread seems to be the bear bandwagon, home of the sky is falling
> crowd. Having missed out on the market bottom in March and some good
> opportunities still to make money money in the market, they hunt
> for reasons the market and the economy might collapse and grouse
> about it. As an economist, I can tell you in fact there are improvements
> in the economy. Though serious problems remain, the improvements
> are not to be rationalized away either. In fact, GDP appears already
> to have turned the corner and gone positive. By years end we will
> see even further improvement. Yield curve analysis also suggests
> the same. The sky is not falling guys. It already did that with the
> credit crunch and its aftermath. Things are looking better, although
> not wildly so.
1. (80% probability) -- Long TBT -- US economy will be weak for years to come, so government will have to borrow more and more money for Stimulus II, III, etc, driving up treasury yield to satisfy China.
2. (20% probability) -- Long TBT -- US economy will recovery eventually, FED will raise interest rates, QE will end, and inflation expectations will be back, ..., all driving up treasury yields.
Now, I'm certainly sticking to cash right now, but I'm very curious what's going to happen... I almost expect the market go past 10,000 DJI before dropping down.
Any thoughts on this "consensus" about the market drop?
On Aug 04 12:24 PM conceptwizard wrote:
> Over at Zero Hedge, Tyler Durden did the math and figured that the > recent 45% surge in the S&P 500 had nothing to do with the fictional > economic "recovery", but was just more of the Fed's hanky panky.
> Durden noticed that the money that's been sluicing into stocks hasn't > (correspondingly) depleted the money markets. That's the clue that > led him to the truth about Bernanke's 6 month stock rally.
> > Zero Hedge: "Most interesting is the correlation between Money Market > totals and the listed stock value since the March lows: a $2.7 trillion > move in equities was accompanied by a less than $400 billion reduction > in Money Market accounts!
> > Where, may we ask, did the balance of $2.3 trillion in purchasing > power come from? Why the Federal Reserve of course, which directly > and indirectly subsidized U.S. banks (and foreign ones through liquidity > swaps) for roughly that amount. Apparently these banks promptly went > on a buying spree to raise the all important equity market, so that > the U.S. consumer who net equity was almost negative on March 31, > could have some semblance of confidence back and would go ahead and > max out his credit card. Alas, as one can see in the money multiplier > and velocity of money metrics, U.S. consumers couldn't care less
> about leveraging themselves any more."
> > So, the magical "Green Shoots" stock market rally was fueled by a > mere $400 billion from the money markets. The rest ($2.3 trillion) > was main-lined into the market via Bernanke's quantitative easing > (seekingalpha.com/symbo...) program, of which Krugman and > others speak so highly.
> > Wouldn't you like to know if Bernanke sat down with G-Sax and JPM > executives and mapped out the details of this swindle before the> printing presses ever started rolling?
You've both perfectly mapped out the origin of the markets' rising from early March and correcting 40% of the drop. Which begs the question: where do the trillions poured in go from here?
May I submit for your consideration, that during the next leg down, the 'realization' leg down, it will all go, "POOF!"
On Aug 08 02:18 PM Creative Investor wrote:
> I can barely find an article or a blogger saying that the bull market
> is here to stay, everyone is in total agreement that the market has
> run it's course, there is no fundamental reason for it to keep going
> up, but plenty of reasons to go down... I can't say that I disagree...
> But what is troubling is this consensus - markets usually drop when
> the majority doesn't expect it to do so, but every pundit on TV and
> online seems to be shorting the market right now...
>
> Now, I'm certainly sticking to cash right now, but I'm very curious
> what's going to happen... I almost expect the market go past 10,000
> DJI before dropping down.
>
> Any thoughts on this "consensus" about the market drop?
As opposed to anecdotal observations here on the blogs, consider that the Daily Sentiment Index (trade-futures.com) indicates 88% bulls with S&P traders, equal to the October 2007 top. Low extremes of put/call ratio adds to the case that there's few left who'll want in, except new, weak hands... sheep fattened for shearing and eating.
> I think you left out the fact that the US government is going to
> seriously raise taxes next year, so selling is going to happen this
> year.
This would make sense, except that there is likely a significant amount of capital losses carried forward from last year which will offset realized gains.
On Aug 04 12:24 PM conceptwizard wrote:
> Over at Zero Hedge, Tyler Durden did the math and figured that the
> recent 45% surge in the S&P 500 had nothing to do with the fictional
> economic "recovery", but was just more of the Fed's hanky panky.
> Durden noticed that the money that's been sluicing into stocks hasn't
> (correspondingly) depleted the money markets. That's the clue that
> led him to the truth about Bernanke's 6 month stock rally.
>
> Zero Hedge: "Most interesting is the correlation between Money Market
> totals and the listed stock value since the March lows: a $2.7 trillion
> move in equities was accompanied by a less than $400 billion reduction
> in Money Market accounts!
>
> Where, may we ask, did the balance of $2.3 trillion in purchasing
> power come from? Why the Federal Reserve of course, which directly
> and indirectly subsidized U.S. banks (and foreign ones through liquidity
> swaps) for roughly that amount. Apparently these banks promptly went
> on a buying spree to raise the all important equity market, so that
> the U.S. consumer who net equity was almost negative on March 31,
> could have some semblance of confidence back and would go ahead and
> max out his credit card. Alas, as one can see in the money multiplier
> and velocity of money metrics, U.S. consumers couldn't care less
> about leveraging themselves any more."
>
> So, the magical "Green Shoots" stock market rally was fueled by a
> mere $400 billion from the money markets. The rest ($2.3 trillion)
> was main-lined into the market via Bernanke's quantitative easing
> (seekingalpha.com/symbo...) program, of which Krugman and
> others speak so highly.
>
> Wouldn't you like to know if Bernanke sat down with G-Sax and JPM
> executives and mapped out the details of this swindle before the
> printing presses ever started rolling?
> Whole Foods sales and profit grow in 3Q
>
> A company like Whole Foods does NOT grow sales in a recession. Premium
> produce? In a recession?
>
My take is that it's a signal that folks are eating in instead of eating out.
The "wall of worry" the market is said to climb is no subjective notion. Indeed, the absence of worry is reflected both by RSI behavior since March as well as increasingly diminishing volume of shares exchanged (as you noted). What is most shocking about this is the seeming lack of fear following last year's collapse of structured finance. And now, who will back Uncle Sam? Any word yet on benevolent life forms found by rovers on the planet Mars? Notta!
You are right. We are on the verge of the most spectacular collapse since the 14th century fall of the house of Bardi. The name of the game for decades has been "Inflate or Die." With the collapse of structured finance a seminal event seizing capacity to inflate, now is time when the death of monetarism soon becomes apparent to all. The Fed already is finished. The degree to which Treasury continues its adherence to belief in the viability of the present financial system will determine whether the United States itself survives what history quite likely will call the coming Great Calamity.
The path of least resistance in the stock market, therefore, is down. Indeed, I believe equity is dead money so long as bankruptcy reorganization of the entire financial system continues being desperately forestalled for the sake of opportunities this presents to the thinnest of interests who in their extreme vulnerability likewise recognize an extraordinary circumstance in which incredible power stands to be consolidated.
1. Think on this
“If the physical scientists who warn about limits to growth are right, confronting the global economic meltdown implies far more than merely getting the banks and mortgage lenders back on their feet. Indeed, in that case we face a fundamental change in our economy as significant as the advent of the industrial revolution. We are at a historic inflection point—the ending of decades of expansion and the beginning of an inevitable period of contraction that will continue until humanity is once again living within the limits of Earth’s regenerative systems. But there are few signs that policy makers understand any of this. Their thinking appears to be shaped primarily by mainstream economists’ assurances that growth can and must continue into the indefinite future, and that the economic contraction the world is currently experiencing is only temporary--a problem that can and must be solved.”
-- Richard Heinberg, author and commentator
2. China wants to dominate the world. To do this it will need to allow the use of it's own Yuan on the world markets (so they can buy oil without using the dollar for example ;) or they will need to invest their $$trillions in a new currency (such as the IMF SDR). but actually, I forsee an imminent announcement that they will trade the Yuan globally on the free market sometime in the next 3 months, in time to shout "HEY! we are a player" before the 2010 rehash of the IMF currency bundles...If this happens that will instantly make the USD NOT the currency of the world and a Bear market more of a certainty.
3. How on earth is the USA going to pay it's debts ? This is being ignored at the moment by simply money printing and the huge stock rally of the last few months blinding a lot of people who would normally be shouting louder against QE.
Realistically, the only way to pay the debts is to either increase taxes, which is already happening but won't produce more money as unemployment rises, OR devalue the $. The only way to quickly do this, would be to offer to buy public gold for a premium price and then re-link the dollar to gold......If gold is $1000 now....$3000 would be a reasonable offer...... OUCH in capitals, Hmmm perhaps unlikely, but a short sharp hit like this would solve a LOT of the longer term US ills.....so probably worth a few $$ of the stuff just in case?
4. The increasing use of technology (as it has since the industrial revolution) is meaning less and less people are needed in employ. Cybernetics have never moved so fast as in the last 10 years and this intense period of "slimming the workforce" has certainly aided that task. Spend 150K on IT and save 1.5 million in wages.... The jobs on production lines and in farming for example are disappearing faster than you can say Model T and I genuinely fear won't be returning.
Sooooooo AM I Bearstard or Bull-tard - Hmmmmmm
I reckon if I had stocks that currently show profit I would sell them right now and to hell with another possible 50% rise. Then I would wait till December before jumping in again if there has been a correction"
If I had stocks at a loss I would hold them :)
....and if I had cash to burn now, I would buy gold (SGX) and bullion, silver (HL), salmon (MHG), Biotech (KOOL), Nat Gas (PBT), L.E.D lighting (PHIA) and a penny share like DDN or PTR on the off-chance....I would not commit anymore than 50% of my cash now though as I would want to wait until December and March to make further investments depending on the next few months moves by the FED and China especially.
So I guess that makes me a bullbearstard :)
How did you get this S&P 326.73 figure???
I like the number.
Thank you.
On Aug 09 09:31 PM Master Che wrote:
> Bear market rallies vex countless reasons when and where the Corrective
> price action ends. I believe most reasons are relatively valid.
> Although none of the above mention the Commercial real estate dilemma..which
> I believed combined with the termination of unemployment benefits
> will serve as a double edged sword...But in the mean the technical
> numbers are CLEARLY pointing up to immediately to 1083.40 (mini S.P.
> cash) before any significant correction occurs which will be short
> lived...We're reaching 1221.70 on this Bear Rally...Then we CRASH...
> down to 326.73
I got my money on SDS.
Is this not TOO simple for these others here, to take such notice of? The 10-yr/Long Bond and U.S. equities markets have been in virtual reverse lock-step from the beginning of the bubble bursting since just past mid-2008.
Geithner and Bernanke have shown a willingness to participate in this not-so-subtle manipulation: jawbone the stock markets down to propel 'flight to quality' asset shifts, bringing Treasury bids down, easing the longer-term debt load.
They are not that concerned with the short-term pain, except to the extent that it may impede their larger goals. The U.S. needs huge amounts of cash or its liquid equivalents, shoved into the system at the lowest aggregate price possible. Individual and even some institutional investors are not as important as addressing U.S. economic costs and entitlements. If the prices paid for this deluge of cash/etc. become too high, it imperils any sensible attempts to plan and fix broken parts of the economy.
On Aug 07 02:13 PM DocRich wrote:
> I've been resisting letting myself think like a conspiracy theorist,
> but points in this article makes sense to me. As long as the US government
> can get subscribers to its debt offerings, I think this market can
> keep going up some (though I agree it's reaching a climax soon).
> Once the government has trouble financing its debt, it will change
> its tactics for the equity markets so stocks will fall, people will
> be stopped out, and they will rush to buy bonds. I just don't think
> they want this to happen until the 2010 votes are in...
he's buying corporate bonds now.
a crash or at least big correction on the horizon?
On Aug 11 08:39 AM zorrow wrote:
> Watch Warren Buffett. He's not the kindly old man next door. He's
> in on everything. When he starts to dump GE and GS, then dump all
> the financials mentioned above fast as you can. Until then, just
> like in Rick's American Cafe, let it ride, on the FED.
Continue to sit on our hands while they are robbing the people blind and buying up every competitor is a recipe for real disaster.
On Aug 12 01:29 AM ron_paulite wrote:
> It's been reported that he has recently stopped buy equities.
> he's buying corporate bonds now.
> a crash or at least big correction on the horizon?
This, good sir, is the reason why markets will continue to move forward, and why the current rally is merely a reflection of improving economic conditions and not the result of an artificial bubble waiting to implode in some spectacular fashion.
On Aug 04 12:24 PM conceptwizard wrote:
> Over at Zero Hedge, Tyler Durden did the math and figured that the
> recent 45% surge in the S&P 500 had nothing to do with the fictional
> economic "recovery", but was just more of the Fed's hanky panky.
> Durden noticed that the money that's been sluicing into stocks hasn't
> (correspondingly) depleted the money markets. That's the clue that
> led him to the truth about Bernanke's 6 month stock rally.
>
> Zero Hedge: "Most interesting is the correlation between Money Market
> totals and the listed stock value since the March lows: a $2.7 trillion
> move in equities was accompanied by a less than $400 billion reduction
> in Money Market accounts!
>
> Where, may we ask, did the balance of $2.3 trillion in purchasing
> power come from? Why the Federal Reserve of course, which directly
> and indirectly subsidized U.S. banks (and foreign ones through liquidity
> swaps) for roughly that amount. Apparently these banks promptly went
> on a buying spree to raise the all important equity market, so that
> the U.S. consumer who net equity was almost negative on March 31,
> could have some semblance of confidence back and would go ahead and
> max out his credit card. Alas, as one can see in the money multiplier
> and velocity of money metrics, U.S. consumers couldn't care less
> about leveraging themselves any more."
>
> So, the magical "Green Shoots" stock market rally was fueled by a
> mere $400 billion from the money markets. The rest ($2.3 trillion)
> was main-lined into the market via Bernanke's quantitative easing
> (seekingalpha.com/symbo...) program, of which Krugman and
> others speak so highly.
>
> Wouldn't you like to know if Bernanke sat down with G-Sax and JPM
> executives and mapped out the details of this swindle before the
> printing presses ever started rolling?
FIRST:
At least 70% of "market trading" is meaningless.
It only flip & flips again, for some quick profit.
No surprise, Goldman Sachs is the 'leader'
in making money from such quick flipping.
Since 70% of market trading is simply
players inside of an enormous casino,
they could decide to walk away from
the game, and it would then collapse
down t less than 30% of before then.
SECOND, THIRD & FOURTH:
The real economy is shrinking ...
Huge numbers of people have become unemployed,
and they are running out of alternatives
to starving on the streets ...
There is vicious spiral of more shrinking economics.
FIFTH:
The $1 QUADRILLION Derivatives Time Bomb
... the total notional value of derivatives
in the financial system is over
1.0 QUADRILLION
(that’s 1,000 TRILLIONS).
US Commercial banks alone own an unbelievable
$202 trillion in derivatives.
The top five of them hold 96% of this. ...
The INSANELY EVIL USA government,
controlled by the banksters, is attempting
to bail out the biggest of those banksters,
BUT, to put those numbers in perspective:
$5 trillion in losses:
an amount equal to HALF of the total US stock market.
Amounts of money created out of nothing,
in order to gamble, were at least an
order of magnitude greater than
everything in the real world.
That was inherent in the dynamics of fiat money systems.
______________________...
There is irreconcilable social polarization ...
Some are getting away like bandits from this!
... lots are having their lives being destroyed.
______________________...
These problems due to this fundamental fraudulent accounting
are still only human creations, however, they are constantly
feeding decisions which are destroying real future options,
since they lead to more and more unsustainable decisions.
Clearly, there are still enough natural resources
left to strip-mine, and new technologies are now
being developed which show some great promises.
The real economy is not yet, dead.
But, it is being killed off by its
control by fiat money insanity!
It is not clear to me where this is going ...
However, I am certain that there are millions
of people in North America who are suffering,
and, in many other places, they already are
reaching real limits of over-population,
and basic limits on natural resources,
such as enough water to even survive.
I have zero faith in a vast majority of people
to start behaving more sanely under stresses.
Therefore, I continue to predict bad things.
A few may do better through all of this ...
However, most will have a rough ride!!!