promise?

BA Merill...is now saying retest of January lows or 15% correction..

In January when Equites were tumbling I said that they would rebound and hit new highs. through the summer ...then sometime in the Summer an event would happen where they would crash...sic correct.

Predicting a change in direction is about as easy and useful as predicting "Nighttime," but with less accuracy. Congratulations on stating the obvious.

And for the record, I'd like to predict RIGHT NOW!

That stocks will go up, and then they will go down for a while, and then after that there will be a recovery and they will go up. And then something will happen and they will go down. You heard it here first!

Seeing that nobody can time the market right this is one way to do it. As there is dollar cost averaging when you buy stocks then you can do the opposite and sell on the same basis of dollar cost averaging. Sell a bit each month. Rebalancing into bonds, cash etc is a good way to go due to the elevated stock market.

This is good really good advice.

I have oft said you have to play the game like the music will never stop. It would be wise to hedge with gold and silver. Have some land where you can grow fruits, vegetables and some chickens. Along with some guns and ammo. That is about it. Investing money in anything either has no ROI and or is fraught with risk.

I get dismayed when I hear the banter that everything is swell and should I do this or that. What is being missed in the equation is the risk in virtually anything you invest in is off the charts. The very fundlementals of the fiscal and monetary system is being manipulated beyond creduality. All in a life support effort for a moribund economic system. You have to be aware of the risk and consider that you are going to be lucky to get out with your skin.

This has been my message and then I explain how and why it is so. I have been following the economy equities and bonds for 30 over years. After that much time you get to know how the beast reacts and its behavior patterns which has a predictive quality.

Surprised some of you still have Internet service after following Glenn Beck's advice to buy farmland and guns and get the hell out of dodge because of impending economic collapse. That was about -5000 Dow points ago.

i am going to predict that the fix is in and those in the know are making hay while they can and then it will come down very far. this is about the end of a 7 year cycle and a presidency and our consumer debt is at record highs.

More than that is at an end..a way of life.

HAL leaps will pair up nicely with your thought process. I bought those decades ago when oil bottomed the last time and you are right on target. Time to do it again as most value on the planet is based off the oil differential. The queen of England is one of the larger holders of BP common stock, so that one is blessed too. Also comes with a 7% dividend.

um.... maybe. i very much doubt it is any kind of apocalypse.

it is going to be a LONG time before oil goes substantially above $50, corrected for inflation. i am going predict that we will see it below $30 again, soon.

I became a Boglehead because of the following post by you in 2011. I ordered that book almost immediately. Thank you sir!

Never said it was an apocalypse...or no more than it was an apocalypse for the Aztecs when Cortes landed in Mexico in 1519.

Good for you...:)

It's the end of an eight-year presidential cycle. The last two times that happened there was an economic downturn. Maybe nothing will happen but keep a close eye on the market. If it starts heading down in the next 30-60 days we may be seeing our third consecutive downturn at the end of an eight-year presidency.

Wall Street gets out first, slowly and quietly. Then the other players see the trend and the herd becomes nervous and starts looking around for an answer. Then the trend accelerates and the herd starts moving. Then the herd finally sees the threat and explodes in every direction in sheer panic. When the dust settles the top Wall Street firms are smiling like the Cheshire Cat while everyone else wonders what the hell just happened. Again.

What was the commonality of events that caused the downturn that you mentioned in the last two 8 year election sequences?

Both in 2000 and 2008 Bubble economies deflated. The first was the Dot Com bubble the second the RE & mortgage bubble. The bubble that is currently building is the Mother of all bubbles and that is the Sovereign Debt Bubble. There is no walking away from an implosion of that bubble for it has to do with the very medium of exchange for the Global economy...the USD. The ramifications of a USD collapse would be like a nuclear war without the bombs.

What most do not realize is that since 2008 a whole new paradigm of reality has been operative. The old rules no longer apply as the FED now has a safety net guarantee of activism to support the economy from failing. That guarantee has been the lynchpin of the advance in Equities since 2012.

As it is turning out without FED intervention the economy falters into a no growth mode(even with intervention it is slow growth at the rate of population increase). This is unsustainable because tax revenues will not keep up with government expenditures in particular SS, Medicare and Prescription Drugs. Thus you are in effect standing on the deck of the Titanic.

Your last paragraph really said it all, Tabs. There are painful times coming.

It's foreign money inflows moving prices up. Domestic money flows are negative. The foreign buyers outweigh the domestic sellers as they are offloading debasing foreign currencies on things of value in the U.S. Hard to believe but what is actually happening. They don't want to save in their phony paper money as many are being debased hard and quickly in percentage terms. As existing bonds are bought by the EU and BOJ, where do you think the original owners of those bonds park the new capital? U.S. stocks and bonds among other things. Huge amounts of displaced capital created every month looking for a home.

Capital will flow to where it is best treated. A large part of the developed world has negative interest rates. So it routes to the most liquid and positive rate market (U.S.) and bids up prices on the available assets. Past metrics of value and fundamentals are out the window in the face of the liquidity wave. Interest rates have never been lower in the history of mankind. It will end when the interest can no longer be paid and the underlying currencies collapse and are reimagined or revalued to an underlying tangible base value and the money flows reverse.

That is why the markets are where they are today and will go higher than anyone will believe. And you won't read anything like this on Yahoo.

Who ARE you?

http://forums.pelicanparts.com/off-topic-politics-religion/734011-adverse-shift.html


An Adverse Shift

Starting with the Financial Crisis in 2008 the United States Treasury embarked on a policy of massive deficit spending resulting in a now 6T USD increase in it's debt level, brining the upfront debt to roughly 16.5T USD. The Federal Reserve on the monetary front lowered interest rates and instituted a number of Quanatative Easings to increase the liquidity of the financial system in order to at first stabilize the system and then to promote economic growth in that system. The increase of liquidity to the system through Federal Reserve purchases of US debt instruments is roughly 3T USD. In September of 2012 the Federal Reserve embarked on OE3 whose tenets included the purchase of 85B a month in US debt instruments and mortgage backed securities with an open ended time frame of the US economy having a 6.5% unemployment rate.

What the concern in this is are the dislocations that these policies have caused in the stability of the global economy and the attendant political, social and cultural strata. Here one can postulate that as US debt levels climb, it destabilizes the above mentioned strata. This is because of several factors which include that the United States is the largest economy in a globally intertwined economy and that the USD is the Reserve Currency of the World. Being the Reserve Currency for the world means that every nation must hold reserves of USD in order to purchase oil. Further the USD being not only the Reserve currency but having a 200 year history of being a stable and thus responsible currency has made it the favored currency to be held by private concerns and individuals. This has been especially true in times of distress either globally or on a foreign national level. This has recently been a factor in the USD strength in the past several years as there has been a flight to the USD and US debt instruments in the face of a potential meltdown of the European Union due to the amount of leverage it has incurred and its slow response to rectifying it's problems.

However with the "unlimited" nature of both the European Central Bank and US Federal Reserves recent QE programs which for all intents and purposes means an unlimited printing of money to purchase sovereign debt, dislocations in the various economies are now beginning to appear which is resulting in their currencies seeking a new equilibrium. This is caused by a defacto devaluation of the large amount of USD being held either by foreign governments, held by private concerns or individuals which then puts pressure on those local economies. Further the real danger lies in the fact that as the USD becomes evermore diluted/devalued/debased those foreign holders of USDs will feel increasing pressure to divest themselves of those USDs or face continued pressure on their economies. Or going beyond this as Y. Aksoy and T Piskovski state in the conclusion of their paper "Foreign Holders of Dollars And The Information Value Of US Monetary Aggregates,"

"That if the leading role of US dollar as an international currency will be challenged by longterm
adverse shifts in the preferences of the foreign holders, the US Federal Reserve may face serious
obstacles in the conduct of monetary policy to stabilize the US macroeconomic environment."

Thus in conclusion the Federal Reserves recent "unlimited" QE program has the potential unintended consequence of being a WMD which could create an economic tsunami that would sweep the world with catastrophic consequences.


The above piece is what caused Bullard to choke and stutter for 5 minutes when he read it on CNBC on 2/23/13. From giggling to stuttering with the CNBC crew. It was on the last segment of that show as a matter of fact that Bullard's website says he talked about the TAPER.

I have known that as a flight to quality foreign capital was buying USD, Bonds, RE, Businesses, and even US Equities. To be honest I wasn't watching the US Equites portion of it, but it stands to reason. I have long said the USA is an ON THE BEACH STRATEGY after the 1960 movie of the same title. In other words the last high ground before the tsunami hits. While I cover the macro you provide the nuance of the mechanics...

In 2009 I felt that the USA had the financial credibility and reserves for one more chance. The powers that be have essentially squandered that chance with continued deficits and now the global economic system is terminal.

I do not put the blame on the Central Banks and their policies as they are trying to stabilize the system to the best of their abilities. Better the devil you know than the one you don't.* The blame belongs with peoples expectations and the politicians..

As I have laid out the economics of it all is causing dislocations in political and social strata right across the globe. The uncertainty and economic duress causes people to be under stress and eventually lose faith in the political processes that can not ameliorate the problems. In the end it causes social and political upheavals which we are now seeing on an almost daily basis. The frequency and severity of those upheavals is a barometer of just how dire the economic situation is becoming. Ants on an ever hotter tin plate is the analogy I have been using.

* The powers that be have tried every remedy in the book of tried and true tricks that have seemingly worked for decades. Those tricks of stimulus and monetary expansion only worked because there was money in the bank and value in the assets and productivity of the people. When faced in 08 with a different animal those tricks didn't work anymore. The expectation was that this was another garden variety crisis, the tricks would work and we would within a fairly short time be back to business as usual and normality would once again prevail. Now that the tricks have failed desperation is going to increasingly reign (on the "Street"). Quite frankly I wasn't fooled by it, I knew from the moment GW hit the tube that the herd was spooked and the illusion of normal prosperity was shattered like Humpty Dumpty hitting the concrete. They didn't get it, and now their feet are getting wet as the Titanic goes down!

On the maiden voyage of the Titanic many of the worlds richest along with the poorest people in steerage all shared the same ride to the bottom of the Atlantic.

So what is FED policy to be now that the US economy is faltering and stumbling because the sugar of the liquidity fix is wearing off? Do they restart the presses in what they now know is another doomed effort to jump start a moribund economy of low demand and no velocity of money. Or do they jiggle on the edges to provide a smoother economic slide into the deep of oblivion? Either way water eventually will seek it's own level.

The answer is very simple, if at the end of the day FED credibility is an important factor they jiggle at the edges and let er slide.

And there she is my advice, my solution...you can not stop the inevitable so you have to think of where you want to be when you hit bottom. Your money and your possessions (investments) are essentially gone, blown away in the storm. You can not protect them.

People live with risk, some people live in hurricane or flood territory, others live in tornado country others in earth quake zones and other in forest and brush fire areas. In each of those locals there is the risk of the perfect storm or event coming along that will wipe you out. If you look at a FEMA map they show flood zones based upon frequency of the event. Even in the least frequent flood zone they still do occur, and we just happen to be living in a time where the once in a 500 or 1000 year event is happening right around us.

The question is not if, but how far are we going to fall? That is essentially up to each and everyone of you as part of a collective to face and figure out. It if be, that it is every man for himself (as it stands now with the divisive politics and culture) then it is chaos. If you chose one of cooperation, reliance and trust then at least you will have civility. You can build on civility.

The FED only intervenes to bail out the biggest players and yes, to stabilize the greater economy. The post-2008 safety guarantee you mention is not new, it was always there and was simply revealed during the 2008 collapse. Henry Paulson hands one president a piece of paper demanding 800 billion be infused into the biggest private institutions immediately, with no congressional review or any other impediment. Another 800 billion went in when the next president took office. "Too big to fail" has been in place for decades, we just didn't see it until it had to be implemented in 2008.

My speculation (good word since we're talking about money) about the past two downturns after 8-year presidential terms is based on Wall Street hedging its bets as a new administration comes to town. The big banks don't really care who wins the White House because they have plenty of people on the inside in both parties. (I say they have a Red playbook and a Blue playbook.) What they hedge against is the uncontrollable uncertainty, regardless of insiders, of just how the new administration will handle fiscal policy. Once they begin to see exactly how the new administration will run its fiscal policy (spending, taxes, trade agreements, wars, etc.) then they re-invest, perhaps differently based on the new policies, and things hopefully calm back down as the new president becomes known and predictable. The big investment banks also hedge against the emotional instability of the greater herd out in the market. As we regular investors get nervous about our investments at times like this the big players move quietly to avoid the spooked herd from costing them money. Pull back. Wait and see. It's probably nothing but let's not take any chances. Let's pull back, slowly and quietly, so that when the herd notices it doesn't cost us anything.

The mandate at the creation of the of the FED in 1913 was to stabilize the economy in times of crisis or panic...The FED was created as a result of the panic of 1907. (Never before 2012 has the FED had to become activist because of political dysfunction).

Not gong to say that isn't in the institutional investors playbook as it sound logical that hey would do that. I know that as a matter of fact that institutions use stealth in their entering into and exiting from positions as a course of doing business. In both 2000 and 2008 there were bubble deflation's that were caused by egregious situations in which they were at the mercies of the fates. The situations were out of control.* So that would be my criticism of your model using the last two election cycles, if you go back further into history why yes your model works as a normal course of events.

Today what is the operative paradigm is what NORUSH alluded to, the flight of foreign capital into the USA as an ON THE BEACH STRATEGY. Here one thinks of poor George Armstrong Custer and his men crowding ever closer to the top of the hill as the Indians close in on them.

One thing that I have discussed is the fact that the FED has with QE3 in September of 2012 asserted itself by practically putting it into writing that they will continue with an activist policy till the cows come home in the face of the ongoing political dysfunction. From that point on Equities and RE never looked back. So it really didn't matter who got elected in 2012** nor in 2016. Both candidates HRC the corrupt Wall Street lackey and Donald the BILLIONAIRE bad boy RE developer are essentially business friendly (Icahn is a friend and confident). Just a thought?



* If you want to talk about chaos in the abstract you have to realize that everything is always out of control and that because the pendulum usually only swings in short arcs it gives the illusion that things are in control.

** In late 2011 I surmised that if BO were reelected Equities and the economy would not like that and would react negatively. The FED saw that the economy was crumbling and that bond interest rate were plummeting in 2012 and as a countermeasure instituted QE3 right before the election in September of 2012. As stated Equities rallied from that point on to this day. So in this macro sense it does not matter who gets elected.

But, Its weird - last weekend I was with my daughter - she showed me Pokemon Go and we ran around in the park by my house getting pocket monsters. I saw 2 other people doing it as well and talked to them - hooked, really hooked.

I actually put in an order Sunday night - sold yesterday... almost 50% gain.

I was shocked - I never gamble on short term gains, this was my first 'guess'. But I figured I would just hold for a week and probably at least wouldn't lose any money... wow - am I going to have to pay taxes...

We dug out her old Pokemon cards - she is thinking of selling them on sleazebay - I told her do it now while it is hot - could change tomorrow.

However, I have a lot of apple I bought in '97 - I don't plan on selling until I retire - the taxes would kill me while I am working. It is sort of hard - you think you should sell, but you end up holding and hoping because you aren't ready to sell. I am never sure what I should be doing...

The dialogue on this thread is all good and thought provoking. Quite an enjoyable read.

In the course of all my readings, I think today's world money flows correlate more closely with the mid 1920's than any other period in time. NIRP is affecting and influencing professional money decisions of pooled capital and redirecting it our way. More along the path of Chinese money driving up Vancouver real estate prices to beyond believable prices, but on a much larger scale. Remember the first goal of a professional money manager is not to lose capital. NIRP insures loses so investment will seek a positive yield no matter how little, as it is better than a loss. The managers are paid on monthly/quarterly/yearly periods and they don't get paid for losses. They will not accept negative bond and cash deposit rates. As long as Europe and Japan have negative yields, all the displaced capital from QE bond buybacks will flow our way. Remember that the EU also is buying corporate bonds and that freed capital is not staying in Europe. Dow 40,000 in your lifetime. And again you will not read that on Yahoo.

Wow on July 5, 2016 the 10 year Treasury hit an all time low of 1.375% which superseded it's previous low in July of 2012 of 1.394%. On Friday the 10 year was at 1.55%. Which for all intents and purpose is treading along at all time lows...This desire for a flight to quality is indicative of the fear factor in the Global economy.

Gold is at apx 1339.00 an oz up from 1080.00 at the beginning of the year.

1ST QTR 2016 GDP 3rd est 1.1% growth

Estimate for July 29, 2016 release of 2ND qtr GDP is 2.4%, they usually have been optimistic in their forecasts

Year over year 2016 is forcast at 1.7% growth....Hmm what is that population growth again?

What it all boils down to is that since 2008 there has been no real growth in the economies except for the rate of population growth. So for all the kings men and horses they have not been able to put Humpty Dumpty back together again... and I said that back in 2010.

Pension funds have projected their viability rates at an 8% return. The FED set it up so that institutional investors have a means of making a positive return. Hence Equities are the only real game left in town. The FED also bought up all that mortgage back paper and if you look around certain areas there is a lot of shadow inventory sitting vacant. Yet they are building more...

It is all essentially a rigged game, and the data to justify their moves is smoke and mirrors with a wink and a nod to the savvy guyz who dig below the headline news to seek the truth of the economy. So they ain't really hidin nothin.

The picture ain't a purty pig with lipstick on it neither.

Timeline....at some point either there will be so many USD's floating around the world that they will be regurgitated or their will no longer be buyers of the bond paper they are printing....

The US is set to really start paying off on SS, Medicare and Prescription Drugs as the Boomer retire. .with lower tax revenues they will have to print bonds to the tune of a Trillion a year starting in 2017 or 2018? How long will it be before the buyers knees buckle.. Ohhh yeah I almost forgot the FED can be buyin up that paper on the sly....till they get to 7 Trillion on their balance sheet and then?????

So the game of musical chairs can go on for a few more years...till you cross the threshold of some magic number where a guy will wake up and say...WAIT A FKIN MINUTE HERE??? Wats this shyte of 25 Trillion on the books and how are they gona pay for it???.. Let us call it the awaking or an epiphany.

Lets say 2022....give or take a year or two..this ain't rocket science ya know...

So it goes the USA is like Wimpy who ate the Hamburger yesteryear and has to pay back the money he borrowed to buy it today. Only he ain't got the money.... So no more Burgers for Wimpy and no money for the lender...everybody gets fked except for the dead guyz in the cemetery who lived the life on your dime.

Sorry Tabs....I like this analysis much better!

Yes, all of this is true and accurate. Under normal conditions our markets would have tanked long ago. If anything, we need to fear high inflation. It is coming so prepare yourself. The economy will stagflate. Taxes will rise. Those dollars that were printed and shipped across the globe are coming home now. This creates inflation in assets first and then expands out from there to other categories. Think $15 minimum wage or Starbuck's coffee. This is why fiat currency values are elastic and not fixed. The theft of purchasing power and value is thru currency debasement. Most world currencies are worse than ours, but the dollar is too strong now and it will be ratcheted down so the gap doesn't widen further and jeopardize exports. That is another plus for U.S. stocks.
I'm not a cheerleader for the stock market. I'm just sharing information with you guys so you see the other side of the story, as money flows always dictate the outcome and there is no reason only the 1% should benefit from it.

Tabs -
I agree with you whole heartedly. The game has been rigged since 1913 and we've been getting shafted ever since Lady Liberty was taken off our coinage. I hope I live long enough to see the people take back control of our republic for the benefit of the citizens and not the corporate elite.....

I will disagree on the 1913 perception. Certainly since 2008.

The USA needed the insurance of a Federal Reserve to become the largest and most important economy in the world. Other wise the US would have been left to the vagaries of the economic fates. That would simply not do as it would not inspire confidence. For an up an comer as was the USA during the 19Th century it would do.

Also during most of the 20Th century that insurance policy was not called on to any great extent. Only after 08 was it called into the breech and then it saved our bacon. So the FED gets a pass from me. Somebody has to be the adult in the room.

I at one time thought hyper inflation ala the Weimar. However the demand curve, industrial utilization rate, velocity of money, employment participation rate, and debt load all indicate deflation as the the consumer is tapped out. Ownership of America is what is changing as that finite foreign capital is repatriated back. The American people are going to be left being beggars.

The EU, Japanese, Chinese, and other BRICS economies are not doing well either and it is a flight to stability that they are buying because they are scared shyteless.

So we have inflation in Equities as foreign capital arrives which is offset by economic weakness as there is no demand. At the moment it makes the US appear to be stable with some growth. But that really is an illusion as the underlying economics globally belie that notion.

The masses are broke but it is still expensive to be poor. I'll stick with the stagflation call. The current glide path is about a 10% annual quality of life reduction / year that is being taken out of the average American's lifestyle. Prices will go up on what you need and down on discretionary consumer import goods. Many foreign currencies have dropped near 10% this year already, so there is the deflation offset achieved thru currency manipulation with no consideration to capacity improvements which occur organically over time. This manipulation is all planned and not randomly accidental.

The Federal Reserve violated its founding directives to only purchase corporate bonds to support the economy when the U.S. entered WW I and bought war bonds. That began the slide that was further eviscerated by Roosevelt eliminating different regional Fed interest rates in favor of a single rate to more effectively buy war bonds to support WW II.

We could go on all day with the things they have done to debase the currency system. When the left hand lends to the right hand, it's only fraud if a higher authority says so. As long as they write the rules unchecked and people believe it is all good - life goes on as usual. The basis of credit is man's faith in his fellow man. It all boils down to faith. Quite simple until the Emperor has no clothes .....

But they were brilliant by lending trillions of dollars to foreign entities and countries insuring future demand of dollars plus needed interest. (Tip for the kids - never borrow in a foreign currency as the lender is setting you up to be a debt slave. The exchange rate goes against you and then you owe even more plus turbo charged interest on top).

I find it hard to complain. I have averaged around 10% as long as I have been investing...just staying the course. It beats most other options.

The people getting killed are the folks who time the market...poorly...and those who do not or can not invest. Time and compounding is like magic.

Bump...

4.5 years later and look at what is happening...it looks like what I said back then could have been said about what is happening today..

Morning, Sunshine!

This.