Financial topics

[Higgenbotham]

On the chart, I have drawn 2 red arrows showing the day I think yesterday was most similar too.

Now I will explain my reasons.

The panics happened in 1929 and 2008. After 2008, the Fed delayed the Great Depression that should have occurred following the 2008 panic. The entire move up in the stock market from 2008/2009 is a bear market rally most similar to the multi month recovery rally from November 1929 to April 1930. Instead of allowing the Great Depression to take place, the economy and stock market have been frozen in place for 9 years.

This 9 year period is similar to the "after crash recovery" the above chart.

Now I will make some chart comparisons to show the similarities.

[Higgenbotham]

[Higgenbotham]

[Higgenbotham]

Since there hasn't been a panic yet, wouldn't the 6.32% surge on Oct
7, 1929, be a better comparison?

There will be a panic, but I think it will be like none other in the history of the world because there is an absolutely massive amount of excess that needs to come out of the market, represented by the price excess and the X quadrillion in derivatives and Y trillion in worldwide QE that got things to this point.

[John]

> There will be a panic, but I think it will be like none other in
> the history of the world because there is an absolutely massive
> amount of excess that needs to come out of the market, represented
> by the price excess and the X quadrillion in derivatives and Y
> trillion in worldwide QE that got things to this point.

I agree with that completely. That will be a true panic, and will
result in blood running in the streets in many places around the
world. But that's why what happened in 1929 was a panic, but what
happened in 1987, 2000 and 2008 were not panics (or, were false
panics).

[Higgenbotham]

> There will be a panic, but I think it will be like none other in
> the history of the world because there is an absolutely massive
> amount of excess that needs to come out of the market, represented
> by the price excess and the X quadrillion in derivatives and Y
> trillion in worldwide QE that got things to this point.

I agree with that completely. That will be a true panic, and will
result in blood running in the streets in many places around the
world. But that's why what happened in 1929 was a panic, but what
happened in 1987, 2000 and 2008 were not panics (or, were false
panics).

I believe that initially 2008 was a true panic. However, I can state with a great deal of conviction that the 2008 panic will pale in comparison to what is coming.

There have been multiple panics during crisis eras; a long forgotten example would be the panics of 1857 and 1859. I think the reason the 1857 panic was the major panic is because it was allowed to run its course. I don't see the initial part of the 2008 panic prior to Fed intervention being a lot different than the initial part of the 1857 panic. The difference is the aftermath of the 2008 panic was not allowed to run its course, so a bigger panic will happen. It will be very difficult to guess when it will occur because the lead up to it is unprecedented.

[Higgenbotham]

If the above analysis by John and me is correct, there will be a massive amount of confusion and panic in the market. I can already see the mass confusion starting. The billionaire hedge fund managers will have no idea what hit them. It will be Galbraith on steroids.

[John]

> If the above analysis by John and me is correct, there will be a
> massive amount of confusion and panic in the market. I can
> already see the mass confusion starting. The billionaire hedge
> fund managers will have no idea what hit them. It will be
> Galbraith on steroids.

Everybody seems to be shocked, shocked that Facebook keeps track
of everything you do, and remembers it. That's one of the
reasons that I haven't used my Facebook account in years. It's
bad enough that I'm tracked by Google and Youtube.

Now that the politicians are beginning to understand what
every IT person has known for years, and that all the neat
data politicians use to get votes can also be used by
their opponents, the hostility to tech is palpably growing.

In view of this sudden and growing hostility, I wouldn't be surprised
to see a big meltdown in tech in the next few weeks.

[Higgenbotham]

I got the following from the Chicago analysts a little over 2 hours after the open. These people are very good and the market reacted off of 2674 (actually 2676 but close enough) just like they said it would. But you can see they were bullish overall.

2674 might see a bearish reaction



However

Closes above 2663 today and especially 2672

= 2708-2710

And possibly 2718

[Higgenbotham]

We got the reaction and then it ran back up and I resold 10 lots, per the post I made at 1:13 EST.

I then called my broker. I said everyone over there is essentially bullish, right? He said yeah. I said I think there's a chance the market has topped. I said I'd give it 50/50 I am right and I'm short and holding, but just 10 lots. I said that way I'll be able to fight it if it goes up and tries to make a new high. I told him why and said I'll send the charts showing it. I then sent him the charts with this message:
"1990 Nikkei I think is close to what the market may be doing as well as 1930 Dow. Count trading days and weeks from the top and you can see where this market might be. In both cases there was a counter trend one day rally after breaking the low of the first move down. As I said the first low in the current market early February I think was artificial due to computer selling, and should have been in the 2700 area."
When the market dropped to about 2648, I called him back. I said can you see the days I'm talking about on the charts? He said yeah. I said I don't have to label them - they're obvious, right? He said yeah, I can see it. I said you can see how computer generated selling may have exaggerated that first move down in early February and how if you whited those 2 days out, it would look a lot like 1990 and 1930, right? He said yeah. I said everyone thinks that low didn't break, but maybe in essence it has because the algos weren't screwing with markets in 1990 and 1930. By the time I got off the phone the market was trading 2622.