Pretzel Logic

4 Possible Market Scenarios

The charts tell the whole story. There is another option to your "one of four" scenario, and that is that we get MORE than one of those scenarios following in close succession.

Personally, I think we get the Great Recession first. It will be much like passing through the eye of a hurricane. Things will seem to be getting better for a while. Then, a year or two down the road, we get the back end of the hurricane, which will be even worse than what we've exprerienced so far. It will probably take the form of Great Depression 2.0. And maybe something else after that.

As I said, the charts tell the story. This is a higher degree bear market than '02. In fact, the closeset parallel is the last great depression. We will have a huge counter-trend bounce at some point that could be viewed as a bull market within the Great Bear (just as they had after the '29 crash) -- maybe we're getting that now. But the worst is yet to come.

The Worst Isn't Over Yet

Yeah, the market is in "bad news is good" mode right now. The rational is that things can't get worse -- and maybe they can't. But they're pretty bad already.

On Apr 03 11:07 AM schlumpf wrote:

> in cnbc the bulls wrote, its a good sign that the job losses are
> higher. The recession is over because the job losses are higher.
>
> I know everybody is long now. but this is crazy.

Dow Nears 50% Retracement; Tread Carefully

Fib retracement levels are measured not from a zero starting point, but from the beginning of a given move.

(Beyond that, the market has never been worth "0" - so 0 would be a fallacious starting point in any case.)

Anyway, if one considers 1982 to be the start of the great bull run to 14K, then the 50% retracement level would be 7494.04 and we've already broken it. Using Fibonacci retracements, that would make the next target the 61.8% retracement at 5890.

Markets Shake Off Unemployment Numbers and Continue Higher

The market didn't ignore the bad news -- the market was happy because the news is SO bad, it means the $800 gazillion dollar stimulus package will pass.

Mind you, I'm not saying I agree with the market, but that's the psychology.

The One-Word Topic of the Day, and Week: Obama

Hmm. Obama will save us all, right? Wake up. We just hired a guy with absolutely no relevant work experience to do the toughest job in the country at the moment.

It's like having an inoperable cancer, and then hiring a "surgeon" who never went to medical school, and actually spent his entire life working at 7/11, to remove it -- solely because this 7/11 Guy had "hope" for "change" when all the real surgeons said it was inoperable. Good luck with that. In reality, 7/11 Guy (Obama) will just kill the patient faster.

Wise move, America. "Hope" springs eternal!

What this country needs for REAL change is Ron Paul, or someone like him. Sigh. Maybe 4 years from now, we'll be ready. No? Maybe 8..? We can only "hope." ;)

Investors Face the Psychological Pressure

This is one time when the media is UNDERreporting the collapse (partially because they don't understand it). We're locked in a self-perpetuating loop:

a) Foreclosures come onto the market and lower comps (real estate values) for the whole neighborhood, so...
b) John and Mary ARM can't refinance now, because their house has become worth less than they owe, so...
c) John and Mary ARM get foreclosed
d) Go back to a)

a) Jack and Jill Consumer can't get HELOC loans anymore, because of everything outlined above, and because of the credit crunch, so...
b) J/J Consumer tighten their budgets, so...
c) Businesses have to lay off workers, because sales are down and...
d) People without jobs spend less
e) go back to b)

The last lynchpin is the government. How much of this bad debt do you think Uncle Sam can backstop in an environment of falling GDP/falling tax revenue before THEY become insolvent? If the foreign central banks decide one day to stop showing up to buy treasuries, we'll have our answer.

And on. There's a lot more, but I have limited time. Suffice to say: we're not even close to bottoming on a long-term basis. We might get a short-term rally... but long-term "investors" here will get creamed. It only SEEMS gloomy now -- it can get MUCH worse. One day we will look back fondly on this time as "the good old days."

Dow 3600 will be a buying opportunity for long-term investors who can see past the seemingly impenatrable doom and gloom that will be all-pervasive when we get there.

I sincerely hope I'm wrong, and by correlation, I hope you're right. But unfortunately, I don't think that's the case.

This Recession Will Be Anything but Deep

There are a few things missing here in the inflation/deflation argument:

1) We are destroying credit, which is deflationary. Much of the money supply is credit and/or leverage. It is imaginary, not "real" money supply. As a result, money is being destroyed faster than it is being created.

2) We already HAD the rabid inflation people were predicting years ago. In case you missed it: oil was trading around $150 bbl, gold was north of $1000/oz., etc., ad infinitum.

3) We have never had inflation during a falling housing market.

4) We have passed a psychological threshold where banks, people, and businesses no longer view "easy credit" as desirable. Gov't can't reinflate that balloon right now, there are too many holes in it.

My personal opinion is that we get strong deflation for a while as the deleveraging and credit destruction continues. Once that unwinds fully, we will finally see inflation again.

Chasing Unicorns: The Cycle Gods Are Still Playing with Us Mere Mortals

Monday was also a bank holiday. No Treasury auctions or settlements.

What a Look Back at the Japanese Market Tells Us

I keep hearing that "the American consumer is tapped out." I have to say that this may be true for many, there are also many savers in this country. I sell large ticket remodeling (35K-100K typical) and you would be surprised how many middle-class Americans pay cash for these purchases. My experience in the real world tells me the statistics may seem more dire than the reality.

Reaching for the Bottom in the Markets

If this is a "generational crash" as some are saying, you might do better to compare what happenned after 1929.

Our Coming Depression

I have this vague glimmer of hope that the coming collapse will make people so disgusted by the ruling parties that we may finally trend back towards a Constitutional government, and leaders like Ron Paul. It's a slim hope, but I'm trying to look for the positives.

Don’t Blame Wall Street - At Least Not Completely

Did someone say "now that Reaganomics has been discredited"? I take it you weren't around for the "wonderful" economy of the 70's, which Reagan and his cabinet turned around...

Such partisan drivel. There are lots of things to blame for this current crisis, but Reaganomics isn't one of them. Paul Volker would NEVER have acted like Greenspan did.

If You Think the Dow Did Well Today, You're Wrong

We're half-way to socialism now. If we go the whole 9 yards, I'll be moving to... hmm. Dunno. What's left? The socialist ruling classes control almost everything now. And half of the brain-damaged public is asking for more.

More Correlations: Oil and the Dollar (and Gold)

Thanks for the excellent charts. I just had to chuckle about this sentence, though: "gold bugs who believe the Dollar will continue to gain strength might bear this in mind."

That's almost an oxymoron. Most of the goldbugs I know think the dollar is suitable only for toilet paper, and will NEVER get their heads around a fiat currency -- even in the face of overwhelming technical evidence that the trend is reversing, at least for the short/intermediate term. :)

The Only Chart True Investors Need to See

Lmao! Looks like this crowd is a little too smart for buy-and-hold propaganda. That crap might work on John and Mary Lunchbucket trying to decide which mutual funds to stick in their 401K, but it obviously ain't workin' here. All I have to say is: look at the 1929 peak on your chart, and then look at where the market finally hits a higher high -- decades later. Sorry, but most of us aren't interested in waiting 20 or 30 years just to get "even" in devalued dollars.