Financial topics

[Higgenbotham]

I took a look at the ES chart during the cash session.

Open 3221.00, High 3229.50, Low 3119.25, Close 3224.00

Gives a different view of the candle.

Regardless, I'm with that guy -----------> Gundlach (https://www.youtube.com/watch?v=_QQf8JU ... .be&t=2280)

[Higgenbotham]

S&P Channel

https://youtu.be/juLRB6vU2zw?t=440

[Higgenbotham]

Gundlach (https://www.youtube.com/watch?v=_QQf8JU ... .be&t=2280)

CNBC interviewer hyperventilates at 38:07

Gundlach: And in the next recession, the United States will be the worst stock market in the world...

CNBC Interviewer: (Starts Hyperventilating)

[Higgenbotham]

S&P Channel

https://youtu.be/juLRB6vU2zw?t=440

The basis for my 3222 target was similar to what he shows. The point at which his upper channel begins is 2872, or 2800 plus 72. My reason for saying a reasonable max would be 3222 is that is 3150 plus 72. 2800 and 3150 are the harmonics previously discussed:

The chart showed significant support/resistance at 700/1400/2100/2800 back in early 2018.

I'm guessing there will not be a move to 3500; instead, there will be a significant stopping point near the average of 2800 and 3500 at 3150 or at 3222 at best. In any case, I believe the market is very close to a top both in price and in time that will stick for all eternity, and after which the market will descend to its intrinsic value of zero. There is zero long term value in an economy that converts natural resources to garbage and there is no long term fix for that except to descend into a new dark age that will last for centuries at a minimum. Nature will fix the pollution problem over a time scale of centuries, along with its associated problems (like declining fertility and cancer, which are a long way from their ultimate worst levels).

The idea there is that 2872 was the euphoric blowout on the tax cuts and this second hit on the channel is the euphoric blowout based on the now universal belief that the Fed can keep the market propped up forever and prevent recessions forever.

Having said that, I have no doubt whatsoever that this channel can be exceeded and the blowout can continue. But I will stay short for now and the point at which I will get wiped out (my suicide level) has risen to S&P 4000.

[Higgenbotham]

Saros 127

March 25, 1857
May 9, 1929
July 2, 2019


Saros 132

September 18, 1857
November 1, 1929
December 26, 2019


1857 Crash low = October 13
1929 Crash low = November 13
2020 Let's see what happens, but in 1857 and 1929, the stock market peaked well in front of Saros 132. However, the brunt of the crash was, let's say, within days of Saros 132. It seems evident that this peak is a multi-century extreme versus a multi-decade extreme and differences in behavior are to be expected. It could also be that an upcrash of inverse polarity to the downcrash of 1929 will end about 55 hours in front of Saros 132. That would put it at Monday afternoon. Further extremes in polarity inversions would take the high into January.

[John]

** 21-Dec-2019 World View: DoubleLine Capital CEO Jeffrey Gundlach

> Gundlach
> (https://www.youtube.com/watch?v=_QQf8JU ... .be&t=2280)

> CNBC interviewer hyperventilates at 38:07

> Gundlach: And in the next recession, the United States will be the
> worst stock market in the world...

> CNBC Interviewer: (Starts Hyperventilating)

Transcription: 36:00 to 38:40

> My favorite chart this year - it's worth repeating - if you go
> back to the 1980s - divide the world into 4 regions -- Japan,
> Europe, United States, and emerging mkts

> Something very interesting has happened. Over that 35 year or so
> period, every one of those four regions has had a moment where
> they were world beaters. They were viewed to be invincible.
> 36:26

> First it was japan, in the late 80s, it was invincible. The value
> of the Imperial Palace land , which is fairly small in Tokyo, was
> actually viewed to be as valuable as all of California.

> Japan was that strong. They were mfging everybody out of business.
> remember? The Nikkei was by far the best stock market in the late
> 80s.

> Then the recession in the early 90s, and the Nikkei was the worst
> mkt, and it hasn't been back since. 30 yrs later it hasn't come
> close to that 1989 level. Then came the euro in the late 1990s.
> 36:57

> There was tremendous enthusiam. It would be the reserve currency
> potentially, there would be a lot of cooperation, it was the
> ascendancy of Europe. And the European stock mkt was by far the
> best in the late 90s, and then came the recession in the oh-ohs,
> and it got kneecapped. 37:13 Hasn't been back there since. 20 yrs
> later.

> Then in the middle of the ohohs , it was a weak dollar, emerging
> mkts were strong with the weak dollar, and China was very much on
> the rise, and emerging mkts were by far the best stock mkts in the
> world.

> Now what happened. Gold, financial crisis, emeging mkts got wiped
> out. They haven't been back since. Now who's the world beater
> now? In the last ten years by far it's been the United States.

> The S&P500 has blown emerging mkts, Japan and Europe totally out
> of the water over the past 10 years. That's partially because
> earnings have been better in the United States. That's partially
> because economic growth has been better in the United States.

> It's also because of financial engineering, which tied us into
> that corporate bond thing, where you were able to get a lot of
> free money for corporations to do buy backs. It's also the tax
> cut.

> My view is that this pattern wll repeat, and in the next
> recession, the United States will be the worst stock market in the
> world, the dollar will be weak, and I don't believe we'll get back
> to whatever high is put in in my career. similar to what happened
> to Japan, then Europe, then emerging mkts. that's what you're
> supposed to be thinking about. and the lynchpin to that thesis is
> that the dollar will be weaker, thanks to the exploding deficits,
> and the Fed going back towards zero. 38:34

Gundlach's final conclusion is right, though stated in a very
roundabout way.

Comparing those four regions is valid only in the sense that every
country goes through boom and bust cycles, and so any four countries
in the last century would work just as well.

So it's hard to say whether he has any clue what he's talking about,
or whether he's being super-clever by couching his prediction of a
stock market crash in huge piles of non-sequiturs because he doesn't
want to be one of those crazy loons who predict a stock market crash,
since then he won't be invited back to CNBC.

Maybe the reason the interviewer hyperventilated is because
Gundlach came too close to the edge of the cliff.

[Higgenbotham]

** 21-Dec-2019 World View: DoubleLine Capital CEO Jeffrey Gundlach

So it's hard to say whether he has any clue what he's talking about,
or whether he's being super-clever by couching his prediction of a
stock market crash in huge piles of non-sequiturs because he doesn't
want to be one of those crazy loons who predict a stock market crash,
since then he won't be invited back to CNBC.

Since Gundlach is a bond guy, probably the way he would tell it if he could is:

US corporate debt is the new subprime. Remember the housing bubble and the subprime debt underlying that? Now there is a stock bubble with a lot of bad corporate debt underlying that which is now rated investment grade, but 40% of it should be rated junk right now and 90% of it will be rated junk in the next recession. I'm a bond fund manager and I'm telling you this junk debt will collapse the stock market like you cannot believe and, unlike the real estate collapse of 2007 to 2009, it won't be possible to hide the problem by failing to bring all foreclosures to market because every stock must be marked to its value on the exchange at all times.

I'm not sure Gundlach really understands stocks but he certainly understands the bonds underlying the stocks, and that may be what matters given the enormous debt bubble. He did refer to the financing of buybacks. I'm also aware that Gundlach is an extremely intelligent guy, having graduated summa cum laude from Dartmouth in math (and I think philosophy).

Somewhere in there he says he doesn't own a single corporate bond. I don't think he says why.

[Higgenbotham]

I wasn't too far off. Probably read this before. Here he is speaking on his own turf.

Gundlach: Corporate Bonds Could Be a Repeat of the Sub-Prime Crisis

by Robert Huebscher, 5/15/19

A collapse in the corporate bond market could rival the sub-prime debacle a decade ago, according to Jeffrey Gundlach.

Corporate bonds are not as overvalued as sub-prime mortgage debt was prior to the financial crisis, according to Gundlach. But because the corporate market is so much larger than the sub-prime was, the overall exposure to investors could be of the same scale. Indeed, “We could easily see $400 billion in losses,” he said.

Gundlach is the founder and chief investment officer of Los Angeles-based DoubleLine Capital. He spoke to investors via a conference call yesterday. Slides from that presentation are available here. The focus of his talk was DoubleLine’s asset-allocation mutual funds, DBLFX and DFLEX.

Gundlach’s fear is rooted in the excessive amount of corporate debt, particularly bonds that are rated BBB, the lowest investment-grade rating, just above high yield.

Corporate bonds have been rich by one standard deviation for most of the last three years, he said, and now are at an “outright sell” level. A massive amount of corporate debt is weighing on the corporate bond market, and a lot of bonds are “complacently owned.”

Gundlach cited a Morgan Stanley report that showed the oversupply and weak ratings standards that could lead to downgrades. Based on corporate leverage ratios, 38% of the corporate bond market should be rated junk, according to Gundlach.

https://www.advisorperspectives.com/art ... ime-crisis

[Higgenbotham]

Where I don't agree with may of the pundits, is the questions is often asked, "OK, but what will trigger (fill in the blank - inflation or what have you)?" and the reflexive response is, "Next recession." I don't think that is necessarily true when there is a massive bubble which is the tail wagging the dog of the economy. For example, the stock market bubble peaked in 2000, but there was no recession until 2001. In 1929, stocks and the economy turned down at roughly the same time. My best guess is the stock market will peak before the next recession and it will be the drop in the stock market that then slides the economy into recession, officially speaking (NBER).

[John]

** 21-Dec-2019 World View: The Trigger

> Where I don't agree with may of the pundits, is the questions is
> often asked, "OK, but what will trigger (fill in the blank -
> inflation or what have you)?" and the reflexive response is, "Next
> recession." I don't think that is necessarily true when there is a
> massive bubble which is the tail wagging the dog of the
> economy. For example, the stock market bubble peaked in 2000, but
> there was no recession until 2001. In 1929, stocks and the economy
> turned down at roughly the same time. My best guess is the stock
> market will peak before the next recession and it will be the drop
> in the stock market that then slides the economy into recession,
> officially speaking (NBER).

That's quite possible, but I tend to favor the theory that the trigger
will be something exogenous, probably something to do with China,
either economically or militarily.

I take note of the fact that there are a lot of new tariffs being
imposed by the US. Even though they're justified since they're almost
all reciprocal to tariffs or trade restrictions that other countries
have had in place for decades, the fact that they're new is
destabilizing. Or, to put it another way, they're slowly eroding the
periphery now, and will soon affect the capital cities of the hegemon.