Global Markets in Review: Reversal in Financial Markets 40 comments
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Rewind the movie to before the stock market lows of March 9: Stocks down, corporate bonds down, commodities and gold down, emerging-market currencies down, safe havens in fashion, including the U.S. dollar and government bonds. In short, risky assets closed sharply lower over the past few days as concerns mounted over the outlook for central bank policy and the sustainability of the global economic recovery, with investors only warming momentarily to the U.S. emerging from recession as shown by the Q3 GDP report (announced on the 80th anniversary of Black Tuesday, October 29, 1929).
Cameron Brandt, senior analyst of fund tracker EPFR Global, said (via the Financial Times):
Good corporate earnings - viewed in recent weeks as fuel for a sustained recovery - are currently being regarded as ammunition for policymakers looking to close the fiscal and monetary stimulus taps.
Adding to the economic uncertainty, Chuck Butler of the Daily Pfennig, highlighted a study by Peter Bernholz (Professor of Economics in Basel) in which he analyzed the world’s 12 most important periods of hyperinflation and discovered that the tipping point occurred when deficits amounted to 40% of the expenditures: Butler said:
For the United States we have arrived at exactly that point. The deficit of $1.5 trillion amounts to 41.7% of the $3.6 trillion in expenses.
Source: Walt Handelsman, October 30, 2009.
The CBOE Volatility (VIX) Index is a measure of the implied volatility of S&P 500 Index options, with very low numbers indicating extreme bullishness and very high numbers severe bearishness. It is also referred to as the “fear gauge” of U.S. stock markets and is used as a contrary indicator as it moves inversely to equity prices. As shown below, it is noteworthy that the VIX has surged by 48.3% during the past seven trading sessions to its highest level since early July.
Click to enlarge:
Source: StockCharts.com
The past week’s performance of the major asset classes is summarized by the chart below. The numbers indicate an all-change pattern in the performances from the past few months as risk aversion re-entered financial markets and investors moved money from stocks and commodities into government bonds and the U.S. dollar.
Click to enlarge:
Source: StockCharts.com
Emerging markets scorecard
A summary of the movements of major global stock markets for the past week, as well as since the October 19 peak and various other measurement periods, is given in the table below.
The MSCI World Index and the MSCI Emerging Markets Index declined by 4.1% and 5.5% respectively during the past week, resulting in the World Index being down 1.8% for the month of October and the Emerging Markets Index recording a zero return. As far as individual markets are concerned, Sweden and New Zealand were the only major markets closing the week in the black. However, a number of markets (mostly emerging) managed to see the month out with positive returns.
U.S. Markets
The U.S. indices closed down for the second consecutive week, yo-yoing during the course of the week, but with a particularly ugly close (on steep volume) on Friday, marking the worst day in the case of the Dow Jones Industrial Index and the S&P 500 Index since the beginning of July. The benchmarks recorded their first loss-making month since February, with the exception of the Dow Jones Industrial Index that was unchanged from September.
Click here or on the table below for a larger image.
Top performers among stock markets this week were Ecuador (+4.2%), Sweden (+1.2%), Bangladesh (+1.2%), Kenya (+1.1%) and Uganda (+1.0%). At the bottom end of the performance rankings countries included Peru (‑9.5%), Ghana (-8.9%), Ireland (-8.9%), Cyprus (-7.9%) and Argentina (‑7.9%).
Of the 99 stock markets I keep on my radar screen, only 15% recorded gains, 84% showed losses and 1% remained unchanged. (Click here to access a complete list of global stock market movements, as supplied by Emerginvest.)
John Nyaradi (Wall Street Sector Selector) reports that, as far as exchange-traded funds (ETFs) are concerned, the winners for the week included ProShares Short Emerging Markets (EUM) (+7.7%), ProShares Short Russell 2000 (RWM) (+6.5%) and ProShares Short Financial (SEF) (+6.5%). Besides short funds, CurrencyShares Japanese Yen Trust (FXY) (+2.3%) and PowerShares DB U.S. Dollar Bullish (UUP) (+1.2%) also performed well.
On the losing side of the slate, ETFs included SPDR S&P Emerging Europe (GUR) (-11.0%), Market Vectors Solar Energy (KWT) (-11.0%) and Claymore/MAC Global Solar Energy (TAN) (-10.9%).
Referring to the massive Wall Street bonuses, the quote du jour this week comes from Allan Sloan in The Washington Post (hat tip: The King Report). He said:
What do the record-high Wall Street bonuses have in common with the record-low yields for savers? Answer: They show yet another way that prudent people, especially those living on fixed incomes, are being cheated by the government’s bailout of the imprudent.
Here’s the deal. The government is spending trillions to keep interest rates down to support the economy and prop up housing prices, and those low rates have inflicted collateral damage on savers’ incomes. ‘It’s a direct wealth transfer from savers and retirees to overly indebted borrowers,’ says Greg McBride, senior financial analyst at Bankrate.com.
Other news is that the struggle to establish a government-backed healthcare plan in the U.S. received new impetus on Thursday when the Democrats in the House of Representatives tabled an $894 billion bill that included a “consumer option”. Separately, the Federal Deposit Insurance Corporation (FDIC) closed nine more banks on Friday, bringing the tally of U.S. bank failures in 2009 to 115 - the first year since 1992 that more than 100 banks have gone under.
Next, a quick textual analysis of my week’s reading. Although “bank” still features prominently, the key words have started taking on a more normal pattern compared with the crisis-related words that have dominated the tag cloud for many months.
Click to enlarge:
The major moving-average levels for the benchmark U.S. indices, the BRIC countries and South Africa (from where I am writing this report) are given in the table below. Most of the indices, including all the U.S. indices, have fallen below their 50-day moving averages over the past few days, but all the indices are still holding above their respective 200-day moving averages. The 50-day lines are also above the 200-day lines in all instances.
The October lows are also given in the table. A break below these levels would indicate a reversal of the uptrend since March, i.e. reversing the progression of higher reaction lows. In fact, last week’s declines resulted in some indices - including the Dow Jones Transportation Index, the Russell 2000 Index and the Nasdaq Composite Index - already having fallen below these levels.
Not shown below, the Australian All Ordinaries Index has already broken through its 200-day moving average, albeit only marginally, with the 50-day average at the same level as the 200-day level.
Click here or on the table below for a larger image.
Below is a chart not many analysts follow, namely the Dow Jones Composite Average, made up of the 30 industrial stocks, the 20 transportation stocks and the 15 utility stocks. According to Richard Russell (Dow Theory Letters), the Composite tends to lead the market on many occasions.
Note that the Composite is trading completely below its 50-day moving average. The divergence with MACD at the bottom of the chart is spectacular. Volume is expanding as the Composite declines. In all, a nasty picture, and one that I take seriously,” said the old-timer.
Click to enlarge:
Source: StockCharts.com
According to Casey’s Daily Dispatch, State Street Global Markets has just released its Investor Confidence Index for October 2009, measuring investor confidence on a quantitative basis by analyzing the actual buying and selling patterns of institutional investors. The results indicate that the big money is starting to turn bearish. The report said:
Global investor confidence fell by 10.0 points to 108.4 from a revised September level of 118.4. The most pronounced decline was evident among North American investors, where confidence fell by 12.8 points from 113.9 to 101.1.
Click to enlarge:
Source: Cris Wood, Casey’s Daily Dispatch, October 30, 2009.
Breadth indicators are useful tools to assess the inner workings of the market’s rallies or corrections, and these indicators are used to identify strength or weakness behind market moves, i.e. to assess how the bulls and the bears are exerting themselves. Three of these measures are discussed below.
The advance/decline spread tracks the difference between advancing and declining issues and is widely used to measure the breadth of a stock market advance or decline. The chart below shows that the cumulative spread between declining and advancing issues on the Nasdaq turned down a few days prior to the October 19 peak and is leading the market lower.
Click to enlarge:
Source: StockCharts.com
Net new highs are calculated by subtracting the number of new 52-week lows from the number of new 52-week highs. March 6 marked an “internal bottom” when a large number of the stocks on the NYSE recorded new lows (whereas a “price bottom” was recorded on March 9). Net new highs have since improved markedly, but it would seem that the ratio is close to falling below the zero line (i.e. when new lows will again exceed new highs).
Click to enlarge:
Source: StockCharts.com
The number of NYSE stocks trading above their respective 50-day moving averages has dropped to 34.7% from 91.6% in September. In order to be bullish about the secondary trend, one would expect the majority of stocks to be above the 50-day line. For a primary uptrend to be intact, the bulk of the index constituents also need to trade above their 200-day averages. This is a slow indicator, with the number still at a lofty 85.9% but down from its recent peak of 93.4%.
Stock market breadth has been moving in the wrong direction over the past few days and the “internals” seem to indicate further downside.
A number of commentators have been making pronouncements about the extent of a possible decline. For example, Jeremy Grantham (GMO) expects the S&P 500 to drop by 15-25%, David Rosenberg (Gluskin Sheff & Associates) sees markets falling by 20%, Doug Kass is looking at -5% to ‑12%, David Fuller at 10-15% and Barry Ritholtz at 5-15% (The Big Picture), with Andrew Smithers (Smithers & Co) the most bearish, viewing the S&P 500 to be 40% overvalued.
Turning to fundamentals: As discussed in a post a few days ago, a good way of looking at valuation levels, and cutting through the uncertainty of having to forecast earnings, is by means of Robert Shiller’s cyclically adjusted price-earnings ratio (CAPE), effectively muting the impact of the business cycle by averaging ten years of earnings.
Using rolling ten-year reported earnings, my research (based on Shiller’s methodology, but including some refinements) shows that the “normalized” price-earnings ratio of the S&P 500 Index is currently 18.8. This compares with a long-term average of just more than 16.3 and implies an overvaluation of 13%. The graphs below show data since 1950, but the actual calculations date back to 1871.
Click to enlarge:
From across the pond in London, David Fuller (Fullermoney) said:
In the short term, technical evidence suggests that we are now in a reaction and consolidation phase for most stock markets. Some of this is likely to be confined to primarily ranging patterns as we have already seen. For others, the mean reversion process towards rising 200-day moving averages is likely to include larger corrections than we have seen to date. At this stage of the stock market cycle, I regard mean reversion as a buying opportunity.
I will bide my time while the fundamentals play catch-up. Meanwhile, caution remains the operative word.
Economy
The Recession Status Map below, courtesy of Dismal Scientist Economy.com, aggregates growth statistics from around the world and allows one to see at a glance which economies are in recession, at risk or beginning to recover. Click on the map to link to the interactive version.
Click to enlarge:
Source: Dismal Scientist
There has been no meaningful change in global business confidence in almost three months. Sentiment improved sharply this summer and is now consistent with a global economic recovery, but a very tentative and fragile one,
according to the results of the latest Survey of Business Confidence of the World by Moody’s Economy.com.
Businesses are most upbeat about equipment and software investment and the broader outlook into early next year, and most negative about the strength of their current sales and hiring. South Americans are the most positive, and North Americans generally the most negative.
Click to enlarge:
Source: Moody’s Economy.com
According to Li & Fung Research Centre, the Purchasing Managers Index (PMI) in China rose to 55.2% in October, up by 1.3 percentage points from the previous month. The Index has stayed in the expansionary zone of higher than 50% for eight consecutive months, indicating that the manufacturing sector in China has continued to improve steadily.
Several countries, such as India, Australia, Norway, and Japan, have already begun exit strategies to drain excess liquidity used to stimulate their economies to counter the global recession. India’s lenders are keeping more cash in bonds and raising statutory liquidity ratios, Australia and Norway have already hiked interest rates, and Japan has said it will stop buying corporate debt by year-end,
reported U.S. Global Funds in its latest Weekly Investor Alert.
A snapshot of the week’s U.S. economic reports is provided below. (Click on the dates to see Northern Trust’s assessment of the various data releases.)
Friday, October 30
Consumer spending - mild increase in Q4
Thursday, October 29
Recession is history, economy back in business
Total continuing claims are stabilizing
Wednesday, October 28
Sales of new homes decline, but inventories and prices remain favorable
Durable goods orders - mixed performance in third quarter
Tuesday, October 27
Case-Shiller Home Price Index - further improvement in home prices
Monday, October 26
Chicago National Activity Index - more validation about economic recovery
Commenting on the U.S. GDP annual growth rate of 3.5%, John Williams (Shadow Government Statistics, courtesy of The King Report) warned that one-time stimulus or inventory items represented 92% of the reported growth.
Many people who planned to buy a car in Q4 probably took advantage of “cash for clunkers” and bought in Q3.
To put this into GDP terms, according to the Bureau of Economic Analysis (BEA) the spike you see in the chart below added 1.66% to the U.S. GDP growth figure. Thus without it, GDP growth would have been only 1.89% (3.5-1.66%) in Q3,
reported Clusterstock.
Click to enlarge:
Source: Clusterstock - Business Insider, October 29, 2009.
Commenting on the U.S. growth outlook, Asha Bangalore (Northern Trust) said:
Going forward, the lift to the headline GDP number in the third quarter is partly from future auto sales, which implies that consumer spending and GDP growth are most likely to show more muted growth in the fourth quarter of 2009 and first quarter of 2010. The Fed is on hold for several months until it is confirmed the unemployment rate has peaked.
According to MoneyNews, bond guru Bill Gross of PIMCO said the Federal Reserve would not “risk raising rates” until the U.S. has had a year-and-a-half of sustained economic growth, at a solid 4% rate.
Meanwhile, Richard Koo, chief economist at the Nomura Research Institute, warned (via MoneyNews) that the United States may go through a “lost decade” of stagnant economic growth similar to Japan’s experience in the 1990s if Washington yanks stimulus money out of the economy too soon.
We still need more government spending,” he said, adding that it could take “three to five years to get out of this mess, even under the best of circumstances.
Week’s economic reports
Click here for the week’s economy in pictures, courtesy of Jake of EconomPic Data.
Date | Time (ET) | Statistic | For | Actual | Briefing Forecast | Market Expects | Prior |
Oct 27 | 09:00 AM | Case-Shiller Home Price Index | Aug | -11.32% | -13.0% | -11.90% | -13.26% |
Oct 27 | 10:00 AM | Oct | 47.7 | 52.6 | 53.5 | 53.4 | |
Oct 28 | 08:30 AM | Sep | 1.0% | 0.5% | 1.0% | -2.6% | |
Oct 28 | 08:30 AM | Durable Orders ex Transportation | Sep | 0.9% | 0.1% | 0.7% | -0.4% |
Oct 28 | 10:00 AM | Sep | 402K | 450K | 440K | 417K | |
Oct 28 | 10:30 AM | Crude Inventories | 10/23 | 0.78M | NA | NA | 1.31M |
Oct 29 | 08:30 AM | Chain Deflator - Advance | Q3 | 0.8% | 1.3% | 1.4% | 0.0% |
Oct 29 | 08:30 AM | GDP - Advance | Q3 | 3.5% | 2.5% | 3.2% | -0.7% |
Oct 29 | 08:30 AM | 10/24 | 530K | 520K | 525K | 531K | |
Oct 29 | 08:30 AM | Continuing Claims | 10/17 | 5797K | 5890K | 5905K | 5945K |
Oct 30 | 08:30 AM | Sep | 0.0% | -0.2% | 0.0% | 0.1% | |
Oct 30 | 08:30 AM | Personal Spending | Sep | -0.5% | -0.7% | -0.5% | 1.4% |
Oct 30 | 08:30 AM | PCE Prices | Sep | -0.5% | -0.5% | -0.5% | -0.5% |
Oct 30 | 08:30 AM | Core PCE Prices | Sep | 0.1% | 0.1% | 0.2% | 0.1% |
Oct 30 | 08:30 AM | Employment Cost Index | Q3 | 0.4% | 0.2% | 0.4% | 0.4% |
Oct 30 | 09:45 AM | Oct | 54.2 | 51.0 | 49.0 | 46.1 | |
Oct 30 | 09:55 AM | Michigan Sentiment | Oct | 70.6 | 70.3 | 70.0 | 69.4 |
Source: Yahoo Finance, October 30, 2009.
Click here for a summary of Wells Fargo Securities’ weekly economic and financial commentary.
Next week sees interest rate announcements by the Federal Open Market Committee (FOMC) (Wednesday, November 4), the European Central Bank (ECB) (Thursday, November 5) and the Bank of England (BoE) (Thursday, November 5). In addition, U.S. economic data reports for the week include the following:
Monday, November 2
ISM Index
•Construction spending
•Pending home sales
Tuesday, November 3
•Factory orders
•Auto sales
Wednesday, November 4
•ADP Employment Report
•ISM Services
Thursday, November 5
•Initial jobless claims
•Productivity
Friday, November 6
•Wholesale inventories
•Consumer credit
•Payrolls, etc.
Markets
The performance chart obtained from the Wall Street Journal Online shows how different global financial markets performed during the past week.
Click to enlarge:
Source: Wall Street Journal Online, October 30, 2009.
“Mistakes are a fact of life. It is the response to the error that counts,” said Nikki Giovanni, American poet, author and activist. Let’s hope the news items and quotes from market commentators included in the “Words from the Wise” review will assist readers of Investment Postcards to formulate appropriate strategies to recover from mishaps that are bound to happen from time to time.
Wishing all my readers a Happy Halloween!
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This article has 40 comments:
seekingalpha.com/insta...
China indexes fairly strong. Japan, Taiwan, Korea very weak. European Indexes breaking down. Housing (HGX) bearish. Lumber ETF topping. Coffee and Oil ETFs ready for profit-taking.
Selling highly likely on Monday.
To profit from this extremely gloomy immediate scenario there are some excellent trading opportunities to be had in short ETFs, as this post on my blog explains more fully: arabianmoney.net/2009/.../
50 day M.A. is 35 % get it below 30% then get ready to buy.....
bad is has a lot priced in.....
On Nov 01 08:27 AM EARLPEARL wrote:
> read what soros has said lately about the "bloodletting" to come
> in commercial real estate, read what gross has said about same, and
> remember buffet got rich buying stocks at 6 and 7 times earnings,
> way back when.. so buckle up the ride is going back down
"The government is spending trillions to keep interest rates down to support the economy and prop up housing prices, and those low rates have inflicted collateral damage on savers’ incomes. ‘It’s a direct wealth transfer from savers and retirees to overly indebted borrowers,’ says Greg McBride, senior financial analyst at Bankrate.com" Yes, it's true the prudent risk adverse savers dependent upon bank CD or worst yet, MMFs now earn close to zero so others could benefit. MMF rates have been below 1/2% for almost a year. A retiree with $200,000 @ 4% earned $8,000 ( in 1981 recession it was more like 8% ) now they earn 1/4% or just $500!
Purhaps the government should declare a national holiday in honor of those peoples sacrifices now and in the years following 9/11 low 1% interest rates.
Unrefined charts such as that shown implicitly suggest all global economies are operating with comparable public policy in terms of both property and the state sector, which is a gross distortion and can lead to muddled interpretation.
It would be far more informative to overlay on such global charts cross-hatching showing the degree of respect for property, and even more useful to normalize them with sizing illustrating the importance of each economy in terms of the global whole. (Another version might overlay with crosshatching the percentage of the state sector within each economy.)
The reason that Venezuela, for example, is in recession, is very different than the reason Spain and Japan are. Argentina's economy lags in comparison to neighbors Uruguay and Brazil for reasons having far more to do with state policy than anything else . (I also question underlying data suggesting that North Korea's economy is growing -- maybe foreign aid to DPRK is what's growing -- but of course reclusive basket cases are always hard to assess.)
Without bringing extra considerations into view, one can hardly draw any meaningful conclusions from diagrams such as these.
In this connection, it never ceases to amaze me that the rulers of states whose governments are hostile to markets uniformly claim to be acting in the interest of the 'common people' while their economic results go from bad to worse. Surely somebody in the ruling elites of such places can connect the dots, and the 'common people' residing there who they rely upon for support can figure out that they are worse off year-after-year. It took generations, but those realities caught up with even the ideologically blinkered 'scientific socialist' rulers of the former USSR.
It is bad that the savers are being subject to low interest rates, but in a climate of deflation they are still positive. Of course if the government did not bail out the banks, these savers would have lots all their money because the bank does not have it being insolvent.
The scary part of this recession/not-recession has been that pretty much every day is Haloween and there are lots of tricks and no treats.
Cash for clunkers and a reversal of consumer confidence are not just another series of bumps in the road. It is a sign we have been driving off the pavement for quite a long time and are quickly realizing no one knows or wants to know where exactly we are and are going. Rather than admitting we are still going downhill, the Federal Reserve and the Administration have been rewriting the economic map and arguing for quite some time that the speed we are moving is due to the extra gas not the angle of the decent.
It's time we woke up. Dollar devaluation does not mean recovery. It doesn't even mean a permanent or meaningful end to the downturn. All it means is we're running out of more and more options to save ourselves when we finally hit rock bottom.
On Nov 01 09:09 AM User 314600 wrote:
> Global diagrams such as that illustrating which nations are in recession,
> moderating or recovering at this stage correlate in many (but to
> be sure not all) cases to states where public policy is skewed against
> the rule of law with respect to property rights.
>
> Unrefined charts such as that shown implicitly suggest all global
> economies are operating with comparable public policy in terms of
> both property and the state sector, which is a gross distortion and
> can lead to muddled interpretation.
>
> It would be far more informative to overlay on such global charts
> cross-hatching showing the degree of respect for property, and even
> more useful to normalize them with sizing illustrating the importance
> of each economy in terms of the global whole. (Another version might
> overlay with crosshatching the percentage of the state sector within
> each economy.)
>
> The reason that Venezuela, for example, is in recession, is very
> different than the reason Spain and Japan are. Argentina's economy
> lags in comparison to neighbors Uruguay and Brazil for reasons having
> far more to do with state policy than anything else . (I also question
> underlying data suggesting that North Korea's economy is growing
> -- maybe foreign aid to DPRK is what's growing -- but of course reclusive
> basket cases are always hard to assess.)
>
> Without bringing extra considerations into view, one can hardly draw
> any meaningful conclusions from diagrams such as these.
>
> In this connection, it never ceases to amaze me that the rulers of
> states whose governments are hostile to markets uniformly claim to
> be acting in the interest of the 'common people' while their economic
> results go from bad to worse. Surely somebody in the ruling elites
> of such places can connect the dots, and the 'common people' residing
> there who they rely upon for support can figure out that they are
> worse off year-after-year. It took generations, but those realities
> caught up with even the ideologically blinkered 'scientific socialist'
> rulers of the former USSR.
The last above paragraph may be precient ; however, remove from the first sentence of that paragragh " who are hostile to markets' and continue with the paragraph. People in this economy, our own economy are at two levels and the danger is the same as third world and it's sliding. Corporate and Financial execs have been receiving ungodly 'bonuses' for increasing profits, cutting labor costs plus inventing and increasing 'service costs'. From ATM's to 'Late Fees' , paying for baggage and on and on ad nauseum. When the "rulers" and our new ruling class discover the "common people" have only Wal-Mart to afford, that winter fuel bills (STARTING RIGHT NOW for 2009!) will usurp any extra funds or totally throw large numbers of barely passing households over the tipping point... and the consumer (who are they really now?...these "common people" who include laid off former exec's and skilled middle levels join the masses of "common people" then what ??? And the only market segment to get the US out of these 30 year recurrent economic down drafts (Consumer) who are on life support now have no 'Industrial base" to replace their purchasing. There is NO INDUSTRY left to buy...they all shifted overseas. All the High TECH companies? Their Growth and new investment is overseas, Other manufacturing already rusting or moved. And our Services Industries... restaurants, hotels, airlines, Insurance, Banks, Brokerages are part of a rust-belt phenomenon of their own...Consumers are crushed ! So ,yes, this is no "USSR" or implied "hostile" economy... but cooler heads amony "Rulers" at Industry and Goverment" had better better get to work and rather seriously. We have serious problems right here!
On Nov 01 11:17 AM jay brebner wrote:
> carbon tax/cap-and-trade to raise revenues and pay off debt is an
> absolute policy proposal must in 2012 election. unfortunately it
> will not happen until then when contribution to GDP of green tech
> can be properly evaluated. the gold bugs will hate this but hyperinflation
> will equal armageddon for the US.
The cartoon says most of what people need to understand.
[‘It’s a direct wealth transfer from savers and retirees to overly indebted borrowers,’ says Greg McBride, senior financial analyst at Bankrate.com.]
Yes, and this is the crux of our situation; this is not a recovery of the solvent consumer or domestic production, but one of outright theft of generations savings and future earnings.
Any recovery SHOULDN'T happen (and likely won't) because it's foundation is IMMORAL.
Washington or Wall Street may have forgotten it, but the struggling American family hasn't; immoral and unethical actions have bad consequences - sooner or later.
From what I have read, Its state bank does not compete with its private banks, but cooperates on vetting and funding projects within the state, which would keep focus and interest in how the collateral is doing fairly close.
I also think that some U.S. states are better at respecting the property of modest-income people than others. Jane Jacobs documented some sad stories of government-enforced takings in The Death and Life of Great American Cities.
We have takings going on now with unfunded federal mandates that end up enriching the usual suspects.
People get elected to local office promising to represent local people. Once elected, they cave when the feds threaten to incarcerate them.
When too-big-to-fails offer to indebt citizens to keep the politicians out of jail, guess who wins. The high-paying local jobs themselves give the politicians too much to lose. They cannot resist this temptation, and they rationalize however they need to get these deals done. If they have to fire whistle-blowers on citizen committees, they just do it.
I think there are some jurisdictions where people are sophisticated enough to figure out how to not get taken by this pattern.
Perhaps that is the secret of North Dakota.
If your people are not paying exhorbitant debt loads (to out-of-state entities) on water, sewer, and other utility bills, it would certainly help to get mortgages paid.
On the other hand, high bills for necessary expenses can clear land of less-advantaged people for the plans of more-advantaged. Raising taxes is another gadget in this tool box.
I don't see the current decline turning into a crash, but I see much greater long-term risk than potential reward in US stocks. I think US stocks should be trading at valuation multiples below the long-term averages because economic growth prospects for the long term are definitely sub-par. I still see the secular trend as bearish whether or not indices drop below the March lows.
Short ETFs are up 10% over the last 2 weeks, but still a buy. It is no time to sit with cash on the sidelines.
One chart did make me raise my eyebrows. Global investor confidence was rising from Jan 1 2009. So while markets were falling over in january and febrauary, investor confidence was rising?? I guess I'll have to do some digging and figure out how they derived those numbers.
On Nov 01 11:17 AM jay brebner wrote:
> carbon tax/cap-and-trade to raise revenues and pay off debt is an
> absolute policy proposal must in 2012 election. unfortunately it
> will not happen until then when contribution to GDP of green tech
> can be properly evaluated. the gold bugs will hate this but hyperinflation
> will equal armageddon for the US.
On Nov 01 04:05 PM Joe Shareholder wrote:
> Are you in Obama's inner circle or just a moron? Carbon taxing spells
> doom to a US economy that is searching for itself right now and teetering
> on fragile footing. Green industries were created as profitable
> scams, not for profitable businesses as most of these companies cannot
> exist without strong gov subsidies from which many profit. Good
> book for everyone to read is "architects of ruin" by Peter Schweizer.
> It will open your mind about what is happening right now. Liberals,
> you want to talk about open-mindedness? Open your minds and read
> this book.
They probably feed off federal funds gathered from the coastal economic powerhouse states like NY, CA, and TX.
On Nov 01 01:03 PM Jade Queen wrote:
> It would be interesting to do a map with the United States parceled
> out and colored by state. North Dakota is apparently doing better
> than many other states, and the guess as to why I have seen mentioned
> is that it has its own state bank through which it runs taxes and
> state business.
>
> From what I have read, Its state bank does not compete with its private
> banks, but cooperates on vetting and funding projects within the
> state, which would keep focus and interest in how the collateral
> is doing fairly close.
>
> I also think that some U.S. states are better at respecting the property
> of modest-income people than others. Jane Jacobs documented some
> sad stories of government-enforced takings in The Death and Life
> of Great American Cities.
>
> We have takings going on now with unfunded federal mandates that
> end up enriching the usual suspects.
>
> People get elected to local office promising to represent local people.
> Once elected, they cave when the feds threaten to incarcerate them.
>
>
> When too-big-to-fails offer to indebt citizens to keep the politicians
> out of jail, guess who wins. The high-paying local jobs themselves
> give the politicians too much to lose. They cannot resist this temptation,
> and they rationalize however they need to get these deals done.
> If they have to fire whistle-blowers on citizen committees, they
> just do it.
>
> I think there are some jurisdictions where people are sophisticated
> enough to figure out how to not get taken by this pattern.
>
> Perhaps that is the secret of North Dakota.
>
> If your people are not paying exhorbitant debt loads (to out-of-state
> entities) on water, sewer, and other utility bills, it would certainly
> help to get mortgages paid.
>
> On the other hand, high bills for necessary expenses can clear land
> of less-advantaged people for the plans of more-advantaged. Raising
> taxes is another gadget in this tool box.
I think taxing pollution is killing two birds with one stone: the government gets revenue to pay for our massive military, and our kids get fresh air and water, which we all need to live.
I don't understand why people don't want to conserve our earth often call themselves "conservatives".
If "conservative" refers to people who conserve things of value (water and air), then the GOP is the most anti-conservative party.
On Nov 01 05:23 PM The Geoffster wrote:
> Well said. Socialism is religious fanaticism by another name.
Stewardship yes - indentured servitude to GE and Utilities and the FED - NO!
I believe you have good intentions and your heart is in the right place. Please consider the possibility that you are being duped when you are told that the sky is falling, with your good personage being used as the fulcrum to make very few a very lot of money.
(Privatized gains - socialized losses - again)
On Nov 01 06:50 PM jay brebner wrote:
> According to a Yale survey ~7% of respondents were considered to
> be complete climate change deniers who considered the whole thing
> to be a conspiracy cooked up by academics to keep the grant money
> flowing. I'm pretty sure Geofster might be in that camp and therefore
> the more fanatically religious as he is hoping against science. Ask
> the catholics how that turned out in the case of Copernicus and Galileo.
On Nov 01 04:05 PM Joe Shareholder wrote:
> Are you in Obama's inner circle or just a moron? Carbon taxing spells
> doom to a US economy that is searching for itself right now and teetering
> on fragile footing. Green industries were created as profitable scams,
> not for profitable businesses as most of these companies cannot exist
> without strong gov subsidies from which many profit. Good book for
> everyone to read is "architects of ruin" by Peter Schweizer. It will
> open your mind about what is happening right now. Liberals, you want
> to talk about open-mindedness? Open your minds and read this book.
>
On Nov 01 07:09 PM ebworthen wrote:
> Actually, the "experts" were predicting global cooling in the 1970's;
> they needed to find a new dog and pony to keep the money flowing.
>
>
> Stewardship yes - indentured servitude to GE and Utilities and the
> FED - NO!
>
> I believe you have good intentions and your heart is in the right
> place. Please consider the possibility that you are being duped when
> you are told that the sky is falling, with your good personage being
> used as the fulcrum to make very few a very lot of money.
>
> (Privatized gains - socialized losses - again)
Therefore, we can agree to disagree.
On Nov 01 08:55 PM fjd10595 wrote:
> OK, just tell us the titles of the books you read on the subject.
> Keep handing the bill for the resources you use to your kids. And
> try sleeping at night.
Was looking for how much emerging markets that are above their 200 DMA ( to measure overought and trend reversal) and came across your post.
Any view on mean reversion to the 200 DMA after being say +40% above the 200 DMA.
I have done a backtesting study on this on Indian NSE INDIA NIFTY index for the last 18 years. And based on that predicted a 15% fall in NIFTY by this month Nov`09 end. In fact I believe that most global markets have the above similar pattern. see details at my blog saanpaurseedi.blogspot...
Cheers
~ The Fixer
www.fdic.gov/news/news...
Seems like everyone agrees it's pullback time. then they will slug it out in a consolidation range for a while and then we wither take off or go lower.
ahhhhh tiring - may you live in interesting times is really a curse and these times sure are interesting. gonna take lots and I mean lots of effort to make money.
seekingalpha.com/insta...
Global short ETFs (EUM, Emerging Markets) is ready to rise. Russia, Turkey, India, Indonesia indexes pointing down.