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Road Running
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  • Is Now The Time To Take The Money Off The Table? 0 comments
    Feb 13, 2013 2:08 AM

    We've have come very far in a short amount of time

    2.bp.blogspot.com/-NB_rmjogZBI/UOTF74zha....jpg

    and if we overlay this graph of simple closing prices with inflation we can see that performance these past few years has been sideways:

    4.bp.blogspot.com/-Q1a3bP-GV8Y/T1ajvk0N9....jpg

    as you can see it is possible to string together a multitude of years without a significant correction:

    2.bp.blogspot.com/-8x5EafwVUKw/UOXZ6lR7v....jpg

    but me must be wary as interest rates have never been this low IN HISTORY

    3.bp.blogspot.com/-Scat_VEIW9I/URrH6UrAC....jpg

    If we use interest rates as our "anchor" then equities could correct significantly in order to be in line with what can at best be described as "deflation expectations." While it is a possibility that interest rates are "wrong" in the sense that they are "made low" by Fed policy...the prudent move clearly is to take money off the table. This is especially true when one looks at the price of "hard assets" namely gold:

    www.nma.org/pdf/gold/his_gold_prices.pdf

    these are VERY high prices for the "barbaric relic." obviously if we are buying gold we are doing so to protect our other assets from deflation. In other words "that's a lot of dollars for very little gold" and as such there are fewer and fewer and fewer dollars that are spent. And if we look at the broader prices for commodities we see an obvious case for a massive dollar shortage

    www.ritholtz.com/blog/2012/04/crb-index-.../

    wow! look at how expensive the broad index of commodities is. so bankruptcies should be at an all time high then of course:

    www.abiworld.org/bkstats/historical.html

    wow again. this chart shows a fascinating collapse in bankruptcies in 2006...but then "up and up we go." unfortunately the chart ends in 2009

    here are some charts and a source for "the gap" of 2009-present

    www.nbkrc.com/January2013_News.aspx

    "Chicago leads the way followed closely by LA and Miami." The connection of very LOW prices with LARGE immigrant populations should be lost on no one.

    Clearly if you're wilding in the debt markets you might want to start looking for some safety. Common sense dictates "where credit leads equities follow." That would be LOWER credit takes equities lower as well. The "panic low" on the S&P is 666. Yet the "outlier" is clearly interest rates. I don't think it would be much of a guess to say "that's where the bubble is." Since be definition "all Government debt is paid for" (meaning it is monetized either through direct injections via the Fed, indirectly via the Fed through Banks, through taxes or through transfer payments) clearly there are some who have over extended themselves on the "future expected return" (say a pension fund or an insurance company) and once the market corrects will be left holding "negative equity." In short "a market clearly exercise is in order" such that a new bull market can begin. I would wait out the current record highs until such a time as a sell off and some type of "moment of clarity" (that a large pension fund, a University endowment, god forbid a State) gives a more solid "panic" for an entry point.

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

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