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Albertarocks
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I was born and raised in southern Alberta and graduated from the department of Structural Engineering Technology at S.A.I.T. in Calgary. My background is mainly in construction management although I spent 10 years selling real estate where I gained some very valuable knowledge about how... More
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  • Hindenburg Omen Issues Biggest Cluster In Years - Let's See What Happens Next! 34 comments
    Aug 15, 2013 8:44 PM

    This is the continuation of a discussion on the Hindenburg Omen which was originated by our friend John Lounsbury nearly 4 years ago. The preceding chapter in this series can be read here. For further reference or to read about actual Hindenburg events we have covered including the near misses which occurred in the "week before" and the "day of" the flash crash, the entire series began with John's original post found here.

    .

    With the chart below we follow the action in the NYSE for the sole purpose of determining whether the Hindenburg Omen is "switched on" or "switched off". As long as its 50 day moving average is rising, the HO is switched on and allowed to issue a signal. I try to maintain the chart on a regular basis so that any time you want to click on the link beneath the chart, you will be able to see whether the price action is above or below the orange line. As long as it is above the orange line, the HO is switched on and "on the job".

    . Click here for a live and updating version which I try to keep updated each day.

    .

    On June 4th the Hindenburg Omen issued its first confirmed signal since August of 2010. A 'confirmed' signal meaning that it issued a second alert within 36 days of the first. Since then there have been numerous signals put forth but the recent cluster was really something almost out of the twilight zone. The HO went off 6 times in 8 trading sessions which is one of the tightest clusters ever. And it did so as the market just continued to chug higher, all the while crumbling miserably from within. Just for the record, that cluster of alarms went off on August 5th, 6th, 8th, 9th, 13th and 14th, 2013.

    So with the most convincing Hindenburg Omen event perhaps of all time, we now have the opportunity to sit back, relax, and watch to see if the banking cartel can indeed print enough money to cause miracles. Because that's probably what they're facing since there are 3 decades worth of money creation behind us and it appears that no amount of money printing from this point forward is doing enough to fight off the deflation genie.

    The world may have gotten to the point where the central bankers are no longer able to create money out of thin air every single day and have it do the same job it once did. From Japan to Europe to the USA it no longer seems that inflation is really showing up anywhere except in food prices and the equities markets. The deflation genie might have truly popped out of the bottle. If so, we can rest assured that some day soon he's going to become frighteningly obvious to everyone as he waves deeds to 3 decades worth of borrowing "that have already been spent" and begins demanding "repayment of all of it - NOW". The deflation genie is well known for having very little patience and 'will' be as brutal as he needs to be in order to get his way. Are we really and truly there yet? I don't know... and I'm not certain anybody does just yet. But it appears that we're in for some very interesting times in the months ahead.

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Comments (34)
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  • davidshelton
    , contributor
    Comments (310) | Send Message
     
    @Author - Super interesting ominous article but what about recent rebound in commodities as well as pgm's, housing price appreciation, interest rates and general CPI numbers? I'd very much appreciate your comments on these.
    15 Aug 2013, 09:54 PM Reply Like
  • Albertarocks
    , contributor
    Comments (2230) | Send Message
     
    Author’s reply » Hello David. Thanks for stopping in.

     

    Not "all" the funny money has gone into equities, that's for sure. But enough of it that 80% of all gains since the 2009 low could probably be attributed to POMO action and all other forms of QE and all it's 3 or 7 subsequent versions of QE. So of course some of those funds found their way into commodities, one of the bankers' favorite playgrounds.

     

    I'm not sure the housing price rebound is really all that's it's purported to be. I don't live in the USA so I'm not really on top of that topic. I 'do' know that the prices in Detroit aren't back up to the level they were in 1960 yet. But I also recognize that Detroit's story certainly isn't representative of the real estate picture throughout the US.

     

    But if the deflation genie has really and truly popped the lid off his bottle, then we haven't even begun to get as much as a sniff of what's coming. I'm not saying we're there yet... I just don't know. BUT... if he truly has escaped, then the bond market is pretty much doomed since nobody will be lending any money to anybody at these rates when the threat of default becomes the major talking point, probably for years to come. Interest rates would definitely climb but I have no idea how high. Suffice to say that if the rates were to simply jump from 3% to 5% half the countries in the world would go bankrupt. Take Japan's case for example: http://bit.ly/14JAIdv

     

    The general CPI numbers are government supplied numbers. Therefore there is no point in looking at those since they're totally fictitious. I hate to sound flippant about that, but the CPI numbers are about as real as the quantity of gold the major banks claim to hold. Just ask Germany about that one.
    15 Aug 2013, 10:45 PM Reply Like
  • aretailguy
    , contributor
    Comments (1049) | Send Message
     
    The housing boom is real but can be easily derailed if interest rates go up even a little bit.
    16 Aug 2013, 01:02 AM Reply Like
  • doubleguns
    , contributor
    Comments (7946) | Send Message
     
    Cant be real when 60% of houses are bought with cash. That is not consumers buying houses that is speculators.

     

    http://bit.ly/19vtoFR
    16 Aug 2013, 06:34 AM Reply Like
  • Albertarocks
    , contributor
    Comments (2230) | Send Message
     
    Author’s reply » 60% with cash? Holy mackerel... that's a stunner. I watched another episode recently (can't remember if it was on TV or the Internet) about the empty cities "still" being built in China. The realtor, an Englishman based somewhere in China, said they were building 12-24 new cities every year, and not a soul lives or works in any of them. Yet all the condos are sold. Paid for with "cash".

     

    Families have pooled 3 generations worth of savings into those condos because they are not allowed to invest their money outside China. So they have the opinion that they have no other investment choices that are anywhere near as "good" as to buy a condo in an empty city, with cash, and just sit on it as long as it's continuing to rise in value. And they "are" rising in value... and will possibly continue to do so until the Chinese power brokers pull "that" plug (money printing). Man, once that dam cracks those poor Chinese families are going to get wiped out. As the realtor said: "Millions of families are going to get wiped out by this".
    16 Aug 2013, 09:05 AM Reply Like
  • davidshelton
    , contributor
    Comments (310) | Send Message
     
    Thanks AR - I'm a fan of the "Stagflation theory" but I note we are closer to deflation than outright inflation. I need to re-read your post a bit and prior articles.
    However, I am concerned by the recent sharp rise in rates also.
    19 Aug 2013, 07:08 PM Reply Like
  • Mark Bern, CFA
    , contributor
    Comments (4783) | Send Message
     
    I'll take a stab at some of that for you, AR, if you don't mind.

     

    davidshelton - commodities, and especially precious metals, are considered to be a good hedge against inflation; precious metals are also considered a safe store of value in time of economic upheaval. A lot of folks expect to see inflation rising skyward because of all the fiat money printing that has been happening for the several years. Housing is a hard asset and folks expect real estate to rise in an inflationary environment also. CPI numbers are doctored compared to historical measures. In other words, the government(s) have made so many adjustments to how CPI is calculated that looking at a historical graph that plots the official CPI numbers becomes meaningless and misleading. It still has value as a measurement tool, but only in a relative manner, imho.

     

    Long-term interest rates are heading higher because of the risk inherent in investing long-term bonds is rising and investors are no longer willing to accept the puny returns that may not even keep up with future inflation. There is also a point at which, when investors realized that the Fed may not continue QE forever, that the risk of principal loss became very real all of a sudden. Investors decided to demand a higher return to accept that risk. Normally, 10-year Treasuries trade at a premium to current (and expected) inflation instead of nearly equal. To get to a normal premium, we should probably see rates on 10-yr Treasuries at 3.5% or slightly more. The bond market has been manipulated by the Fed's QE and money printing, but that cannot be sustained forever. Eventually, yields will find their way to "normal" levels in spite of Fed action. This happens primarily because the debt levels of the U.S. have passed the point where investors considered further investment to no longer be "risk free." Thus, the effectiveness of QE has run its course and the Fed is no longer in control.

     

    I don't agree with the common wisdom that says that inflation is coming, though. The demographics of the U.S. population don't support continued rising demand. The peak of the baby boomers has past its peak in consumption years and has begun to save, pay down debt, and prepare for retirement. That means less spending by the largest (93 million, adjusted for immigration) and wealthiest (in aggregate) generation in the history of the U.S. is beginning to consume less and this trend is almost assuredly going to continue until the next generation of meaningful size hits its stride in the early-to-mid 2020s. Thus, I expect falling demand in the U.S. (same thing happening in Europe and Japan) to cause deflation instead of inflation. I realize that I am swimming against the current, but this is where all my research leads me.

     

    Initially, if this actually is the beginning of a new bear market (one never knows for sure until it is well underway), then there is likely to be panic by all those who believe they understand what will happen next. Many will flood back into "safe havens" like precious metals and Treasuries pushing prices back up temporarily. But, once the initial wave(s) recede and deflation begins to rear its ugly head, there will be a dash to the exits. There aren't many places to hide in a deflationary environment. Cash is usually king because it will buy more next year, next month, next week, or even tomorrow than it will buy today. Holding fiat money is a scary thing to do in crisis, I know. But that may be the best option. I don't mean holding cash in a bank account, either. Financial institutions are still over-leveraged and profits are being created by paper entries (and can disappear quickly with a small rise in interest rates or a sharp fall in equities or real estate). There is a lot of risk lurking in every direction.

     

    My position currently consists of some silver coins, a little gold, and a lot of cash (building a position over time by systematic withdrawals).

     

    I am not a survivalist (I know it sounds like it). I believe in a self-correcting political and economic system that has swung too far in one direction and needs a major crisis to bring about the necessary adjustments to get the country back on track. It's coming. but then I also believe that the worst will pass after a few years and that a better foundation will emerge from the ashes. If I'm right, there will be a lot of great bargains for those who are ready with enough dry powder and enough patience to take advantage of the opportunities (much lower prices again). Take heart, after the worst comes the best.
    15 Aug 2013, 11:06 PM Reply Like
  • Wave Rider
    , contributor
    Comments (10) | Send Message
     
    Hi AR from Tasmania. I haven't commented for a long time but I do regularly check in to see what is happening with the HO. Thanks for all the time and effort you put into this....I really appreciate it.

     

    I have always been interested that the number of sightings of the HO in a cluster does not seem to be a predictor of the strength or timing of any subsequent downturn. I have therefore been spending some time on the keyboard examining all the data associated with the recorded confirmed HO's going back to 1986.

     

    Rather than use the DJIA that Dr. Robert McHugh used I have used the S&P as it probably gives a better indication of the wider market. You still get the same approximate proportions of declines that are regularly quoted for the HO. i.e. 25% of the time the market falls by 15% or more etc

     

    The interesting thing though, is that while the number of sightings in a cluster is no real guide to the dimension of any decline the pace of the rising market before a confirmed HO is. Generally the majority of confirmed HO with subsequent major declines have come after the market has averaged a gain of over 0.08% per day since the low that followed the previous HO. How long ago the last HO occurred does not seem to affect this observation.

     

    The results of the HO which followed daily gains averaging over 0.08% were -31%, -30%,-21%,-18%, -15%, -10%, -5%, -3% and 0%. That's 6 out of the 8 declines of 10% or more. By comparison in the case of all other confirmed HO where the average daily rise of the market was less than 0.08% the average decline after a HO averaged less than 7%.. And that was only brought up that high by a couple of outrider observations.

     

    The interesting thing about the cluster of HO you are currently recording is that the average daily gain since the market low following the last confirmed HO you reported a couple of months ago is the second highest on record. That assumes the May/June HO is considered a different one to the August one we are currently monitoring. This suggests the present HO could be a portent for a very significant market decline indeed. That might explain some of the amazing data you are reporting in the last 2 or 3 days.

     

    Hope you find this interesting AR. Keep up the great work and thanks once again.
    16 Aug 2013, 03:55 AM Reply Like
  • Albertarocks
    , contributor
    Comments (2230) | Send Message
     
    Author’s reply » Well hello there Wave Rider. I remember chatting with you several years ago. Maybe 2-3 years ago? Could it have been that long ago? I think I mentioned that my sister-in-law's sister is married to a fellow from Hobart. His name is Hinch, one of the nicest guys I've ever met. A geologist, so his work was consulting in the oil business up here.

     

    Man, that's some outstanding work you did there. And definitely thinking kind of outside the box. Brilliant in fact. You certainly think like a true analyst because it's one thing to come up with a very insightful angle like you did, but then to go to work and compile all that data... that takes a lot of work. But it's worth it, isn't it. Those stats you provided are just so good. In fact, they're so good that I just got the brain wave to write an article on my own blog and basically copy and paste your comment above and present it as the main focus. Literally, your comment above would "become" the article. Can I have your permission to do that? You're comment isn't going to be read very much on this particular page here at SA, but on my own blog it would get at least 1000 reads per day for the first couple of weeks. You deserve that. With full credit to yourself of course and I would also explain that it was first published here on SA. In fact I'll even provide a link in that article which would bring readers back here if they want to see the original.

     

    I'm very busy these days with my son's business so I wouldn't be able to get to it until the weekend, but that's only 2 trading sessions away. Let me know if you'll let me do that, ok? Besides, your contribution is inspirational enough that I might finally get off my ass and publish some of the other 10 articles I have in draft form. Maybe I'll back up a step here... I'll publish at least one... yours, lol.

     

    It's great to hear from you again WR. And thanks so much for sharing that outstanding piece of work with the readers here. I'll tell you something else that I definitely find fascinating... I have many, many other friends who are technical analysts and I interact a lot with them on other blogs. There are two in particular, "Mars" and "DarkestKnight", both of whom are among the very best Elliott Wave theorists and practitioners I have ever come across. Both of them are Australians. And there are others who are very good too (Australians I mean). I swear, there must be something very enlightening that happens to the great people who live under the Southern Cross. I've been impressed with their technical ability for 5 years now.
    16 Aug 2013, 08:32 AM Reply Like
  • Wave Rider
    , contributor
    Comments (10) | Send Message
     
    Thankyou for the very kind words AR.

     

    I am very happy for you to use the material in your blog. To help you I have listed the fuller version of the data below. Just a few things to note in case anyone looks to pick holes. The list is from Dr McHugh but I use S&P data not DJIA so some of the days to low, days from low and quantum of decline may vary slightly from his original data. The average daily change % is calculated using calander days (it doesn't really change the results to use trading days ....it is just easier to divide by calender days).

     

    McHugh included one HO in his list that includes only 1 observation. He also notes that the Dec 98 HO was only there by the very smallest of margins. If you discounted both of these the correlation of size of downturn to average daily market rise leading up to the HO is even stronger.

     

    The key cut off on this short list is about 0.08%. A daily rise of more than that before a HO since the last low is almost always followed by a large decline while generally the decline is less if the daily growth rate was less than 0.08%.

     

    Hence the rule "The faster they rise the further they might fall". Incidentally the average daily growth rate before the August 5 2013 HO was 0.193%. That is by far the highest ever except the doubtful Dec 1998 HO.

     

    While a large decline is not assured it does seem more likely in this instance. For the doubters who might jump up and down if the market bounces in a week or two or three, I would point out that the largest declines usually take 80 to 120 days from the HO. The decline is a long drawn out tortuous event not a race to the bottom.

     

    Date Signals % Decline Daily Chng from last low

     

    22-Dec-98 2 0.0% 0.227%
    16-Oct-07 9 14.8% 0.152%
    20-Jun-01 2 21.0% 0.142%
    21-Jul-98 1 17.8% 0.133%
    24-Jan-00 6 4.9% 0.123%
    14-Sep-87 5 30.7% 0.116%
    11-Dec-97 11 2.9% 0.104%
    09-Oct-95 6 30.0% 0.089%
    11-Oct-89 38 9.5% 0.088%
    02-Dec-91 9 1.0% 0.070%
    12-Jun-96 3 6.3% 0.070%
    27-Jun-90 17 16.8% 0.068%
    13-Apr-04 5 4.0% 0.066%
    13-Jun-07 8 7.2% 0.065%
    15-Sep-00 9 9.3% 0.065%
    26-Jul-00 3 8.4% 0.059%
    07-Apr-06 9 5.5% 0.057%
    31-May-13 4 3.5% 0.055%
    15-Jun-99 2 4.1% 0.046%
    19-Sep-94 7 4.4% 0.043%
    25-Jan-94 14 6.8% 0.035%
    03-Nov-93 3 1.2% 0.033%
    21-Sep-05 5 2.8% 0.024%
    20-Jun-02 5 20.7% 0.015%
    02-Aug-10 5 7.0% -0.015%
    12-Mar-01 4 6.5% -0.075%

     

    As regards your friend Hinch, what a coincidence. I live in Hobart and my first apartment here was next door to one in a tower block owned by a Hobart geologist who now works in the oil industry in Canada. Hinch doesn't happen to own the unit next to my former home does he?
    16 Aug 2013, 07:16 PM Reply Like
  • Albertarocks
    , contributor
    Comments (2230) | Send Message
     
    Author’s reply » Thanks for the additional data WR. Don't worry, nobody would go to the trouble to pick holes in your work. They're not such 'doubters' or 'debunkers' that they would go to the trouble. Generally speaking I find that people just appreciate the overall message and results of work like that. They'll find it interesting.

     

    About Hinch... I don't know if he owns (or 'owned') an apartment down there or not. But I know how to find out. I'll let you know when I do. His first name is Alan.

     

    Thanks again. I should get that article together before the weekend is over.
    16 Aug 2013, 11:12 PM Reply Like
  • Albertarocks
    , contributor
    Comments (2230) | Send Message
     
    Author’s reply » About our Hinch... I have asked my nephew to inquire about whether or not Hinch ever owned an apartment in Hobart. So my nephew will ask Hinch directly, or will ask Hinch's wife. My nephew is slightly closer to them than I am, since they are his aunt and uncle. To me the Hinches are "sister of my sister-in-law". We'll know soon. Wouldn't that be one serious coincidence for the record books?
    16 Aug 2013, 11:42 PM Reply Like
  • Wave Rider
    , contributor
    Comments (10) | Send Message
     
    Many thanks AR

     

    Just one little change you will have to make to the data I gave you.

     

    The correct figure for 22 December 1998 is 0.0% decline but the average daily change was 0.086% NOT 0.227% as I sent you.

     

    The reason for the error was that I had taken this HO out as McHugh felt it barely qualified. However I put it back in as a qualified HO is a qualified HO and needs to be tested in this analysis. But in inserting it back in the spreadsheet it did an inbuilt reference calculation I had forgotten about in the copy function!!

     

    Don't worry all the other data is fine. This doesn't alter the findings, in fact the Pearson Rank Correlation Coefficient goes up meaning the observed relationship about prior market growth rate is even stronger.

     

    More importantly this means the present HO has been proceeded by the highest ever recorded daily average growth since the last low. This may mean a large drop is on the cards. Perhaps the only doubt is the abnormally short period since the last low which helps push up the growth rate. Still, after a similar short period for the Jan 2008 HO a decline of almost 10% occurred.

     

    Thanks for finding out about the apartment. I am kind of curious and agree it would be one of those stranger than true coincidences. It happens though. Earlier this year I was stopped in a small town in Italy and asked for directions by four people. They turned out to also from Tasmania!! To put that in perspective, the odds of that are not much better than would have been the case if all of us come from PEI Canada.
    17 Aug 2013, 01:36 AM Reply Like
  • Wave Rider
    , contributor
    Comments (10) | Send Message
     
    "Still, after a similar short period for the Jan 2008 HO a decline of almost 10% occurred."

     

    I must be getting tired. I was looking in the wrong column. That should read
    "Still, after a similar short period for the Oct 2007 HO a decline of almost 15% occurred."

     

    Time to hang up the keyboard and get into the pinot noir before I do any more damage.
    17 Aug 2013, 02:07 AM Reply Like
  • Stilldazed
    , contributor
    Comments (2097) | Send Message
     
    Hi AR,
    Thanks for the update and the thought provoking comments that follow.

     

    K202,
    Thanks for the deeper insight into deflation, I think we have already been seeing the start of it. Wages are down, real estate is down, the market is artificially propped up and must come down (as I think ARs HO insta is pointing out). However, I do see inflation in the utilities (water and power), fuel and food. I agree that cash will be king, at least for awhile as well as barter of anything that is a basic requirement for survival. I can't think of any good strategy other than liquidity and quick thinking to make the most of opportunities that are presented. Hunt, fish, and farm. Back to the basics.
    16 Aug 2013, 04:11 AM Reply Like
  • Albertarocks
    , contributor
    Comments (2230) | Send Message
     
    Author’s reply » Hi Still Dazed. Thanks for your thoughts. I acknowledge that there is more inflation going on than I admitted to, but all in all, I consider it to be minuscule relative to the amount of money that is being printed in an effort to produce it. And it's spotty.

     

    I think that the deflation scenario will likely last considerably longer than most people envision. In my humble opinion, if it truly gains a foot hold... that's it... it should last for at least 4 years. Perhaps as long as a decade, but let's start with 4 years. After that... man, after that we could see the Dow at 100,000 with the inflation that should unleash once the deflation issue has truly and painfully been addressed. Either that, or we might even be seeing forms of currency in the future that don't even exist today. At the very least, I'm certain the Euro won't exist in it's current form.
    16 Aug 2013, 08:52 AM Reply Like
  • Mark Bern, CFA
    , contributor
    Comments (4783) | Send Message
     
    AR - I suspect that you may be right that there could be huge asset inflation after deflation has run its course. But I don't think the end of deflation will come until the demographics trend supports more growth. That doesn't happen until about 2022 or so. Without demand growth it is hard to see much inflation coming sooner.
    16 Aug 2013, 10:30 AM Reply Like
  • Albertarocks
    , contributor
    Comments (2230) | Send Message
     
    Author’s reply » Good point about demographics. A whole lot could happen with human population in those 8 years. As I mentioned above, the deflationary scenario could last perhaps as long as a decade. But I hadn't thought about demographics when I said that... so your point is well taken... makes perfect sense to me.
    16 Aug 2013, 10:53 AM Reply Like
  • doubleguns
    , contributor
    Comments (7946) | Send Message
     
    Regarding demographics...

     

    I hope this link works.

     

    http://bit.ly/13Fft8d
    16 Aug 2013, 10:59 AM Reply Like
  • Albertarocks
    , contributor
    Comments (2230) | Send Message
     
    Author’s reply » Great visual DG... thanks. I had actually read a few months ago that that was the case but I forgot about it. The reason the author had pointed it out was because of the dispute that started brewing between Japan and China over one of the islands down there. He was pointing out that if anything nuclear were ever to develop between those two countries the global population would take quite a dent. An awful thought to even ponder, but it's worth noting, isn't it.
    16 Aug 2013, 12:18 PM Reply Like
  • doubleguns
    , contributor
    Comments (7946) | Send Message
     
    That should indicate where the demographic will impact growth the most. And if China removes the one child policy it would be even faster.
    16 Aug 2013, 02:03 PM Reply Like
  • doubleguns
    , contributor
    Comments (7946) | Send Message
     
    I think the answer is stagflation not deflation or inflation.

     

    AR, thanks for keeping this going. It gets more "interesting" each year. Clusters....seems like a cluster Phuc is closer to the answer.
    16 Aug 2013, 06:38 AM Reply Like
  • Albertarocks
    , contributor
    Comments (2230) | Send Message
     
    Author’s reply » Cluster Phuc... I believe that's Taiwanese isn't it? Which reminds me of something:

     

    Two Thai girls approached me about a month ago and asked if I wanted to sleep with them. I was reluctant at first... I just had a bad feeling about that proposition. But they said "C'mon, it'll be like winning the lottery". So I did it. Turns out they were right, because much to my horror it turns out we had 6 matching balls.
    16 Aug 2013, 08:56 AM Reply Like
  • H. T. Love
    , contributor
    Comments (17485) | Send Message
     
    A.R: LoL!

     

    Strange days, as Jim Morrison said.

     

    HardToLove
    16 Aug 2013, 10:21 AM Reply Like
  • doubleguns
    , contributor
    Comments (7946) | Send Message
     
    AR are any of them here.

     

    http://bit.ly/13Fd4KE
    16 Aug 2013, 10:37 AM Reply Like
  • Albertarocks
    , contributor
    Comments (2230) | Send Message
     
    Author’s reply » OMG. LMAO, if that had really happened to me I wouldn't feel like an idiot for having gotten sucked in. Those are some of the most deceiving decoys I've ever seen.
    16 Aug 2013, 10:57 AM Reply Like
  • Albertarocks
    , contributor
    Comments (2230) | Send Message
     
    Author’s reply » Lol... we're not getting many 'like's for that exchange are we. Bunch of stuffed shirts around here, lol.
    16 Aug 2013, 12:20 PM Reply Like
  • doubleguns
    , contributor
    Comments (7946) | Send Message
     
    My shirts are stuffed but they are stuffed with me. I should loose about 30 lbs.
    16 Aug 2013, 01:58 PM Reply Like
  • Moon Kil Woong
    , contributor
    Comments (11069) | Send Message
     
    I'm not sure about deflation, but I do see a cyclical downturn that looks pretty nasty since interest rates are rising because the Federal Reserve can't sell US Treasuries and is running out of QE to do that and support Fannie Mae and Freddie Mac etc. with bond purchases.

     

    Rather than the dollar getting strong in the oncoming economic weakness it is getting weak as China, Japan, and others simply refuse to buy more US Treasuries and when they roll them over they only buy short term no matter how high the yield goes since they know there is no one who can or will buy them if they want to dump them en-masse.

     

    By the way, don't be fooled by the brokerages. The US economy hit a slowdown in July and everyone knows it except the dumb consumers who they are trying to dump stock and houses on so they can rid their portfolios of the junk. Once again, the public will be last to know and the downtun will ruin them by the time the news confirms there actually is a downturn. This is a slow rolling downturn because people are still faked into believing the Fed or government stimulus will somehow save the day. Guys, they've been prolonging a downturn for way too long and can't even erase the effects of 2008 because it is a systemic crash.

     

    That means the US must change and face reality. TBTF banks are too big and must fail. There are a lot of zombie companies supported by government spending that's unsustainable. Medical costs make no sense and just having the government pay them instead of a HMO or you won't solve anything. Fannie Mae and Freddie Mac are still selling people into bankruptcy and asking taxpayers to pick up the bill. The regulatory and legal system has made the cost of doing business unaffordable. And student loan scams are endebting our youth with worthless diplomas from worthless universities.

     

    In the meantime our manufacturing base continues to get hollowed out and we are losing jobs not making progress (real % of employed is still falling (The unemployment filing figures are a joke in terms of determining labor growth or losses). Please don't get deluded by the buy before the downturn hype like in 2008.
    16 Aug 2013, 02:27 PM Reply Like
  • Albertarocks
    , contributor
    Comments (2230) | Send Message
     
    Author’s reply » Welcome Moon. I've admired your commentary for a long time but I believe this is your first comment in this room. Although I 'have' seen you interact in other places with some of the other participants here.

     

    Great comment as usual.
    16 Aug 2013, 02:35 PM Reply Like
  • Albertarocks
    , contributor
    Comments (2230) | Send Message
     
    Author’s reply » The article that gives Wave Rider's great analysis a lot more exposure, as it certainly deserves, is published now and can be found here:
    http://bit.ly/14bn2Y4

     

    John Lounsbury is also going to be publishing it later today. So Wave Rider, you'll be able to find your analysis somewhere on the front page of GEI sometime Sunday evening.
    http://econintersect.com
    18 Aug 2013, 05:14 PM Reply Like
  • Wave Rider
    , contributor
    Comments (10) | Send Message
     
    Many thanks AR I really appreciate the effort you have gone to on this.

     

    As I said earlier, now that I have corrected the December 1998 HO this means that the average daily change of 0.193% is by far the largest ever recorded before an HO. The only other close ones were October 2007 at 0.152% ( a subsequent decline of 14.8%) and June 2001 at 0.142% (a subsequent decline of 21%). Food for thought.

     

    I originally did this work some time ago to examine the reliability of the HO as an exit signal in a simple market investment strategy. I have previously done a lot of work (nearly as much as you have on the HO) on an entry signal. I think the HO is a good measure of fractured markets and correctly indicates potential for a decline, but the issue always was "when has the decline indicated by a confirmed HO finished and when should you re-enter the market?" There can be a number of up and down days on the way to the eventual low which is easily recognisable now in hindsight but obviously very difficult to sense at the time.

     

    I think that the work I have done on another signal largely solves that dilemma. I am not really prepared to publicly broadcast that at present but I am interested to discuss it with you on a one to one basis as our interests really are a case of ying and yang that could go to produce something very interesting. Is there any way you can arrange a secure one on one contact between us?

     

    If there is, hopefully that will get me one step closer to the beer you have "shouted" me. (Aussie jargon)
    19 Aug 2013, 06:54 PM Reply Like
  • Albertarocks
    , contributor
    Comments (2230) | Send Message
     
    Author’s reply » Please accept my apologies for being tardy with the reply Wave Rider. Sure, you can email me at albertarocks@shaw.ca
    22 Aug 2013, 02:09 PM Reply Like
  • Wave Rider
    , contributor
    Comments (10) | Send Message
     
    Hi AR

     

    I have sent you an email. You might like to check your junk box as well because I have had to send it using a public domain email and they tend to get shot through to junk mail by some recipients.
    1 Sep 2013, 12:59 AM Reply Like
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