Forecasting The Market: A Thought Experiment Revisited [View article]
Doug
I just want to offer my compliments to you. Your work stands alone and rises above the sentiment driven views of most. I find your objective and extremely thorough analysis particularly useful.
Thanks again for the work you do and know that it doesn't go unrecognized or unappreciated.
This Week's FOMC Meeting Could Signal The End Of The Policy Driven Bull Market [View article]
EK
I have my own theory. I think we are going to see a global collapse in equities and thereafter solve the reserve currency problem once and for all at which point all sovereigns can employ monetary policy in a way that works.
The equity collapse is inevitable in my opinion anyway and if it occurs the political resistance to solving the reserve currency mess will be severely diminished. Keynes told us what we needed to do at Bretton Woods but the US was opposed. What we need is a non sovereign currency and the SDR is the solution.
This Week's FOMC Meeting Could Signal The End Of The Policy Driven Bull Market [View article]
skeptical
My view on precious metals is pretty straightforward. In an inflationary enviornment PM's will appreciate and in a deflationary enviornment PM's will depreciate. Not that complicated really.
I was in the inflation camp thinking the Fed's policy was certain to be inflationary. Bernanke assumed the same thing but it never occured in spite of QE. What we have today is cash hoarding and deleveraging which is deflationary.
Gold got way ahead of itself pricing in a lot of inflation that never occured and necessarily corrected when that became obvious. I do see a deflationary situation for the present and don't see gold or other PM's performing well.
By the way the dollar's been weak of late but not for the right reason. What we need is a sharp spike in M2 and velocity. The reason we have been weak of late has to do with the euro and the yen being strong and that is not inflationary.
This Week's FOMC Meeting Could Signal The End Of The Policy Driven Bull Market [View article]
wallisr
I am not sure that is the most probable statement but I do think most assume a stay the course position. There's been a lot of trial balloons floated of late on Fed tapering and I am kind of suspicious as to why they are doing that.
I guess my point is I don't see anything Bernanke can say that would ignite the bulls short of ramping up QE and I don't know where the supply comes from if they do that.
Maybe Thursday's Stock Market Ramp Has To Do With Bonds, Not Stocks [View article]
dk
There are those that will debate the pros and cons of Bernanke's policies for a while yet. Clearly in the short run monetary stimulus has managed to impact stock and bond price and little else.
On the other hand fiscal stimulus has managed to keep the economy out of recession. As the private sector quit spending the government stepped in. The Fed has enabled massive deficit spending through QE so both fiscal and monetary policy have worked in concert to delay the deleveraging that seems imminent at this point.
In my opinion the Fed's policy must be judged based on what happens going forward and of course that is what this article is about. By the way I am not in the camp that subscribes to the idea that governement should implement policy to avoid economic contraction at all costs. It doesn't really avoid contraction - it just delays it and makes it much, much worse when it eventually comes.
Maybe Thursday's Stock Market Ramp Has To Do With Bonds, Not Stocks [View article]
rod
I expect lower on the week. We keep bouncing off the 50 day MA and pushing back toward it. I think we go through the 50 day next week. Of course Bernanke's comments are ultimately going to dictate direction so it's kind of like playing poker. I know the hand he's holding isn't a good one but he could run a great bluff.
I sure don't think volatility goes away. I think I read where the weekly chart on the VIX put in a high close for the year on Friday.
Maybe Thursday's Stock Market Ramp Has To Do With Bonds, Not Stocks [View article]
dkarousos
Good comments.
Whatever the Fed's intent was it is hard to make a convincing argument that they were succesful in any meaningful sense. It surely must be a little disconcerting to the Fed at this point that yields are spiking right in the face of a Fed program that will absorb most of this years new issue.
Be real interesting to see how Bernanke handles comments this week.
Great point on the margin issue and one I made in a recent article. I can see all assets coming off in unison based on the margin call argument.
One wonders just how much leverage we are talking about here as I do believe the primary dealers are long stocks as the Fed's surrogates through off balance sheet transactions and I see that as a leveraged position. If margin debt is $384 billion then I think that number could easily be 3 to 4 times that high if the primary dealer banks holdings are included.
High volatility should signal VaR models to move to risk off and that could result in a high volume sell off that finds no bid. I think we agree on where the market is going - one wonders if we won't get there in record time once it starts.
We need to hear more from you Harold. Really pleased you decided to publish this piece and hope you follow up with more.
The Paradigm Shift Has Begun - This Isn't Going To Be Pretty [View article]
AR
Yes we can agree that central planning ends badly. As to who sets the fix I assume it would be agreed to collectively but that it wouldn't be a permanent fix - only an initial fix. The key to resolving the mess we are in to my way of thinking is the need to be able to devalue effectively and monetize a whole lot of excess debt. That would require some arrangement that allowed a currency to be devalued relative to the SDR.
Great article. I agree with the long VIX recommendation but am curious on the short bond call. I just wrote an article suggesting that the Fed's attempt to micro manage both bonds and equities has presented the Fed with a real problem today. The problem - if they continue with the current bond buying program and based on the CBO's deficit projection they end up with 84% of new issue for 2013.
Seems to me the Fed is trying to back stock investors off the edge of the cliff with their tapering rhetoric before they create a Nikkei like parabolic spike that will end just as badly as the Nikkei. In so doing they have created a divergence in stocks which are still hanging tough but bonds have fallen significantly. A bond market crash will certainly have contagion effects in stocks and one wonders if the cash hating investment industry won't move to bonds in this scenario pusing bonds higher as investors exit stocks.
Recesion and deflation seems certain at this point as well and that should push the dollar higher and create a demand for reserve currency assets which could also push bonds higher at some point.
I have floated the idea that a recession and a sharp sell off in equities may create a high demand for bonds and allow the Fed to unwind their balance sheet in the face of this high demand without pushing rates a lot higher in the process.
I assume you don't see any chance of this scenario in the short term but in the intermediate term and after equities begin to sell off do you think this scenario could develop as outlined? Respect your opinion and do hope you comment on this.
The Paradigm Shift Has Begun - This Isn't Going To Be Pretty [View article]
AM
I have identified my time line and it is for the whole of 2013. We won't know if we are in official recession until the NBER tells us we are. We could be there now and not be announced as such for months.
As to a market call I think we see a crash - not a correction - before the end of 2013 that will produce a fall of 35% to 50%. I can't be more specific and am perfectly willing to be judged on that call at the end of this year.
That is the call and I have made some subjective attempts to call a top and been wrong to date. I have also explained in clear language that the hardest thing to do in the market is make a call on the top. That said I did do a pretty good job on both Apple and Gold - not so good on the stock indexes.
Forecasting The Market: A Thought Experiment Revisited [View article]
I just want to offer my compliments to you. Your work stands alone and rises above the sentiment driven views of most. I find your objective and extremely thorough analysis particularly useful.
Thanks again for the work you do and know that it doesn't go unrecognized or unappreciated.
JS
This Week's FOMC Meeting Could Signal The End Of The Policy Driven Bull Market [View article]
Well said.
JS
This Week's FOMC Meeting Could Signal The End Of The Policy Driven Bull Market [View article]
I have my own theory. I think we are going to see a global collapse in equities and thereafter solve the reserve currency problem once and for all at which point all sovereigns can employ monetary policy in a way that works.
The equity collapse is inevitable in my opinion anyway and if it occurs the political resistance to solving the reserve currency mess will be severely diminished. Keynes told us what we needed to do at Bretton Woods but the US was opposed. What we need is a non sovereign currency and the SDR is the solution.
JS
This Week's FOMC Meeting Could Signal The End Of The Policy Driven Bull Market [View article]
My view on precious metals is pretty straightforward. In an inflationary enviornment PM's will appreciate and in a deflationary enviornment PM's will depreciate. Not that complicated really.
I was in the inflation camp thinking the Fed's policy was certain to be inflationary. Bernanke assumed the same thing but it never occured in spite of QE. What we have today is cash hoarding and deleveraging which is deflationary.
Gold got way ahead of itself pricing in a lot of inflation that never occured and necessarily corrected when that became obvious. I do see a deflationary situation for the present and don't see gold or other PM's performing well.
By the way the dollar's been weak of late but not for the right reason. What we need is a sharp spike in M2 and velocity. The reason we have been weak of late has to do with the euro and the yen being strong and that is not inflationary.
JS
This Week's FOMC Meeting Could Signal The End Of The Policy Driven Bull Market [View article]
I know but I'm hoping everyone will overlook the mistake this time. I had that on my list to correct before submitting but forgot to do it.
JS
This Week's FOMC Meeting Could Signal The End Of The Policy Driven Bull Market [View article]
I am not sure that is the most probable statement but I do think most assume a stay the course position. There's been a lot of trial balloons floated of late on Fed tapering and I am kind of suspicious as to why they are doing that.
I guess my point is I don't see anything Bernanke can say that would ignite the bulls short of ramping up QE and I don't know where the supply comes from if they do that.
JS
Maybe Thursday's Stock Market Ramp Has To Do With Bonds, Not Stocks [View article]
"You are quite brilliant with English in keeping it tidy and understandable for people such as myself."
That is the best compliment I could receive and what I strive for. Thanks.
JS
Maybe Thursday's Stock Market Ramp Has To Do With Bonds, Not Stocks [View article]
There are those that will debate the pros and cons of Bernanke's policies for a while yet. Clearly in the short run monetary stimulus has managed to impact stock and bond price and little else.
On the other hand fiscal stimulus has managed to keep the economy out of recession. As the private sector quit spending the government stepped in. The Fed has enabled massive deficit spending through QE so both fiscal and monetary policy have worked in concert to delay the deleveraging that seems imminent at this point.
In my opinion the Fed's policy must be judged based on what happens going forward and of course that is what this article is about. By the way I am not in the camp that subscribes to the idea that governement should implement policy to avoid economic contraction at all costs. It doesn't really avoid contraction - it just delays it and makes it much, much worse when it eventually comes.
JS
Maybe Thursday's Stock Market Ramp Has To Do With Bonds, Not Stocks [View article]
You are right about the 50's. Thanks for pointing that out. I was thinking about that period as I wrote this piece.
JS
Maybe Thursday's Stock Market Ramp Has To Do With Bonds, Not Stocks [View article]
I expect lower on the week. We keep bouncing off the 50 day MA and pushing back toward it. I think we go through the 50 day next week. Of course Bernanke's comments are ultimately going to dictate direction so it's kind of like playing poker. I know the hand he's holding isn't a good one but he could run a great bluff.
I sure don't think volatility goes away. I think I read where the weekly chart on the VIX put in a high close for the year on Friday.
JS
Maybe Thursday's Stock Market Ramp Has To Do With Bonds, Not Stocks [View article]
Good comments.
Whatever the Fed's intent was it is hard to make a convincing argument that they were succesful in any meaningful sense. It surely must be a little disconcerting to the Fed at this point that yields are spiking right in the face of a Fed program that will absorb most of this years new issue.
Be real interesting to see how Bernanke handles comments this week.
JS
Cooking Up A Crash [View article]
Great point on the margin issue and one I made in a recent article. I can see all assets coming off in unison based on the margin call argument.
One wonders just how much leverage we are talking about here as I do believe the primary dealers are long stocks as the Fed's surrogates through off balance sheet transactions and I see that as a leveraged position. If margin debt is $384 billion then I think that number could easily be 3 to 4 times that high if the primary dealer banks holdings are included.
High volatility should signal VaR models to move to risk off and that could result in a high volume sell off that finds no bid. I think we agree on where the market is going - one wonders if we won't get there in record time once it starts.
We need to hear more from you Harold. Really pleased you decided to publish this piece and hope you follow up with more.
JS
The Paradigm Shift Has Begun - This Isn't Going To Be Pretty [View article]
Yes we can agree that central planning ends badly. As to who sets the fix I assume it would be agreed to collectively but that it wouldn't be a permanent fix - only an initial fix. The key to resolving the mess we are in to my way of thinking is the need to be able to devalue effectively and monetize a whole lot of excess debt. That would require some arrangement that allowed a currency to be devalued relative to the SDR.
JS
Cooking Up A Crash [View article]
Great article. I agree with the long VIX recommendation but am curious on the short bond call. I just wrote an article suggesting that the Fed's attempt to micro manage both bonds and equities has presented the Fed with a real problem today. The problem - if they continue with the current bond buying program and based on the CBO's deficit projection they end up with 84% of new issue for 2013.
Seems to me the Fed is trying to back stock investors off the edge of the cliff with their tapering rhetoric before they create a Nikkei like parabolic spike that will end just as badly as the Nikkei. In so doing they have created a divergence in stocks which are still hanging tough but bonds have fallen significantly. A bond market crash will certainly have contagion effects in stocks and one wonders if the cash hating investment industry won't move to bonds in this scenario pusing bonds higher as investors exit stocks.
Recesion and deflation seems certain at this point as well and that should push the dollar higher and create a demand for reserve currency assets which could also push bonds higher at some point.
I have floated the idea that a recession and a sharp sell off in equities may create a high demand for bonds and allow the Fed to unwind their balance sheet in the face of this high demand without pushing rates a lot higher in the process.
I assume you don't see any chance of this scenario in the short term but in the intermediate term and after equities begin to sell off do you think this scenario could develop as outlined? Respect your opinion and do hope you comment on this.
JS
The Paradigm Shift Has Begun - This Isn't Going To Be Pretty [View article]
I have identified my time line and it is for the whole of 2013. We won't know if we are in official recession until the NBER tells us we are. We could be there now and not be announced as such for months.
As to a market call I think we see a crash - not a correction - before the end of 2013 that will produce a fall of 35% to 50%. I can't be more specific and am perfectly willing to be judged on that call at the end of this year.
That is the call and I have made some subjective attempts to call a top and been wrong to date. I have also explained in clear language that the hardest thing to do in the market is make a call on the top. That said I did do a pretty good job on both Apple and Gold - not so good on the stock indexes.
JS