Financial topics

[aedens]

I don't know about others who visit this site, but I am finding this market very difficult to read at present and am wondering whether I shouldn't take my profits and watch from the sidelines.
How are other people positioned at present?

http://finance.yahoo.com/news/summary-b ... 49926.html <------- like we did not already know...
I am until end of month. To many loose wires.

[Higgenbotham]

How are other people positioned at present?

I have remained 100% short but a reversal from this 1230s area that goes up toward 1275 could convince me to cover.

May 6, 2010:

"At 2:42 pm, with the Dow Jones down more than 300 points for the day, the equity market began to fall rapidly, dropping more than 600 points in 5 minutes for an almost 1000 point loss on the day by 2:47 pm. Twenty minutes later, by 3:07 pm, the market had regained most of the 600 point drop."

120 points per minute (or 1% per minute) is the previous escape velocity.

The herd looks left and right. Dreiser captured the essence.

And now units of this vagrom and unstable street throng, which was forever shifting and changing about them, seemed to sense the psychologic error of all this...

http://finance.yahoo.com/news/summary-b ... 49926.html <------- like we did not already know...

The Baby Boomer herd needs to be told when to move. When a "person of influence" such as Fitch says it, then it is automatically deemed true, but if you say the same thing, it needs to be proven.

[aedens]

I think dave is close on a few points,
effective consensus, japan into 19th year of lost decade, deveraging cycle, passes for governance,
vanilla cycles as in 5 yrs to go, gold is not a country, intuition of thinking people, historical nature,

moderates understand confusion shelters corruption, congress cannot give what we do not have,
question why,

This was from there debate linked back. I feel the expression "vanilla cycles as in 5 yrs to go"
was in context to consumer deleveraging. We can thus assume demographical realities
will cancel out in context to this cycle also
global decoupling and the lack thereof, the reality of an over-indebted global regime and its 3 incompatible targets
The good news is that international concerns about global imbalances may be much less pressing than many think. The bad news is that conventional balance-of-payments measures are clearly less reliable in a world of rising intra-firm trade and complex supply chains. That matters because dodgy statistics lead to policy mistakes. Governments should clean the figures up.
constructive dialog

[aedens]

[quote="reviresco

The mother of all conduits in regards to making good on derivative bets would be the FDIC.
The FDIC has three tasks: insure our deposits, examine the health of our banks, and to smoothly manage banks that fall into receivership.
The FDIC is not AIG, or any of the other marks at the trillion dollar derivatives gambling table. It is one of the few federal entities that
has very much retained the trust and admiration of the citizen (the Federal Bureau of Investigation and the U.S. Military coming immediately
to mind, amongst others) that is tasked with the one federal monetary responsibility that is literally at street level for the average citizen.
To be clear, the bulk of the derivative bets out there are fraudulent because the parties that would collect on the derivatives have no insurable
interest in the failure of the entities and instruments insured (a contract of insurance with no insurable interest is gambling. Period.)
Sometimes, moments of great consequence are veiled in our day to day experience. I believe this is one of those quiet moments.
I am not fond of people who create extra work for me, and I apologize for posting this,
https://writerep.house.gov/writerep/welcome.shtml
http://www.senate.gov/general/contact_i ... rs_cfm.cfm

but we would do well to immediately write a brief email or letter to our congressmen and senators to backup our fellow brave citizens
who work for the FDIC who are willing to push back against guaranteeing $75 trillion in derivatives. Even if 99% of these cancel each
other out, which will not happen, the insurable interest of the bulk of the remainder is suspect and can only be proven by looking at the actual
contract. Are you aware of any contracts that were examined before payout with AIG? Not likely this time either.

Just a brief note expressing support for the FDIC not insuring anything other than actual deposits at America's banks.[/quote]

Reg T mod
Regulation T gives the Federal Reserve the authority to change margin.
http://www.fdic.gov/regulations/laws/fe ... alAD26.pdf
http://www.access.gpo.gov/nara/cfr/wais ... 20_99.html

[Higgenbotham]

Oct 24, 2011 8:40am
Merrill Lynch Warns of Another U.S. Debt Downgrade

The United States is in for another credit downgrade by year’s end if Congress fails to agree on a long-term plan to tame the nation’s $14.8 trillion debt, Merrill Lynch warned.

In a research note, the Bank of America unit predicts that either Moody’s or Fitch will move to downgrade the U.S. AAA rating. Standard & Poor’s cut the nation’s bond rating in August, causing the stock and bond markets to swoon, after months of bickering by Congress on how to best reduce spending and cut the deficit. The United States spends about 40 percent more annually than it collects in taxes.

“The credit rating agencies have strongly suggested that further rating cuts are likely if Congress does not come up with a credible long-run plan” to cut the deficit, Merrill’s North American economist, Ethan Harris, wrote in the Friday report. ”Hence, we expect at least one credit downgrade in late November or early December when the super committee crashes.”

http://abcnews.go.com/blogs/business/20 ... downgrade/

US Lawmakers Unfazed by Downgrade Risk
Published: Thursday, 27 Oct 2011 | 11:11 AM ET

A growing number of U.S. lawmakers do not think another downgrade of the country's AAA rating will harm America's economy, raising questions about how much pressure Congress is under to fix the intractable budget deficit.

Analysts warn, however, that signs of complacency on Capitol Hill threaten efforts to cure America's long-term fiscal health.

"I was surprised by the nonchalance" to the prospect of another downgrade, Bell said. "The attitude on the Hill is, 'Treasurys are the safest place to put money at the moment, because look what happened after the S&P downgrade.' It is the worst possible outcome from the debt limit crisis."

G. William Hoagland, a former Capitol Hill veteran who served as staff director of the Senate Budget Committee, said another U.S. downgrade could further hurt Europe's economy, in turn posing a risk to the fragile U.S. recovery.

"The nature of the global economy dictates that actions we take in the U.S. have ramifications far beyond our domestic borders. It would be a mistake for the legislators and decision-makers to not take into consideration that those global impacts will come back to haunt our economy also," Hoagland said.

http://www.cnbc.com/id/45060211/US_Lawm ... grade_Risk

[Higgenbotham]

I've read many times over the past 3 years that there can only be one generational crash and that 2008 was the crash.

Now I will present an opposing theory that says that there will be three generational crashes during this crisis period.

To begin, I first want to talk about bubbles. Normally, a bubble occurs once per saeculum. For example, there was one bubble during the 1630s in Holland, there was one bubble during the 1720s in England, there was one bubble during the 1850s in the US, and there was one bubble during the 1920s in the US.

The recent era in the US was unique in that it featured not one, but three bubbles. The first bubble was the tech bubble that culminated in 2000, the second bubble was the real estate bubble that culminated in 2007, and the third bubble was the "all one market" bubble where the Federal Reserve created a bubble in all items except real estate, which was the one item they needed to inflate in order to save the banks.

The second bubble (the real estate bubble) was the most extreme of the three bubbles.

Since this era has uniquely featured three bubbles, it will also uniquely feature three generational crashes.

Just as the second bubble was the most extreme of the three bubbles, the second generational crash will be the most severe of the three crashes.

The first generational crash occurred in 2008 following the second bubble. The second, and most severe, generational crash has yet to occur and will follow the third bubble. The third generational crash will occur leading into the final stock market low a few years into the future. It will be the least severe of the three crashes but it will feel like the most severe and will finally cure the speculative fever.

The logical response is, OK, you said there were 3 bubbles and there wil be three crashes, but crashes always immediately follow bubbles. So, really, there was a crash in 2001, a crash in 2008, and there may be one more crash in 2011 or 2012 perhaps. That's a reasonable response. I don't think that's how it will happen, but it's logical to think that. Another logical response would be to say that there was a second bubble in 1937 which was also followed by a crash.

I have my own reasons for thinking there will be two more crashes. But for anybody who doubts that, think of the fact that there was a mini crash in 2008, then in 2009 the market turned down to a new low and the Fed threw everything they had at it to stop the meltdown. What would have happened had they not been able to stop the meltdown in 2009?

[aedens]

The consumer is Sovereign. In addition Regulation T gives the Federal Reserve the authority to change margin
and it is coordinated. We are already in liquidity trap since debt is a infection uncurable with more debt
and if you overleverage you do not want to be that guy right now. Sectors should find a base and I do not want
my hair on fire. We charted this scenario already Higg and as we conveyed we hope to be found wrong.
Tiberius said it best..... "Governing Rome is like holding a wolf by it's ears...."
Rome has one fear only. I seen Fred Upton ask a direct question today. He did not get the proper answer.
It's not that government has lacked information needed to fix the problem.
It is institutionally incapable of bringing about the desired result, since the principles of profit and loss,
private property and contract, enterprise and entrepreneurship, do not exist in government.
Any Government operates with an eye to its own short-term survival, and those of its connected interest groups,
and nothing else. LVM
I think the fork in the road is here.
The United States want to join the Socialist demolition derby and they think we are the problem.
The issue is always the same: the government or the market. There is no third solution.

[Higgenbotham]

http://www.zerohedge.com/news/entire-sy ... l-casualty

There is no safe financial haven. A tipping point was reached 2-3 months ago. MF Global is a canary in the coal mine.

Quoted between August 13 and September 10:

As in the hall, in which there has been a sumptuous banquet, we perceive the fragments of a feast now become prey to beggars and banditti; if in some instances, the spectacle is less wretched and disgusting; it is, because the banquet is not entirely over, and the guests have not all yet risen from the table.

William Playfair
An inquiry into the permanent causes of the decline and fall of powerful and wealthy nations
1805

Guests are rising from the table.

"Men, it has been well said, think in herds; it will be seen that they go mad in herds, while they only recover their senses slowly, and one by one."

Charles Mackay
Extraordinary Popular Delusions and the Madness of Crowds
1841

[vincecate]

I
The second bubble (the real estate bubble) was the most extreme of the three bubbles.

Since this era has uniquely featured three bubbles, it will also uniquely feature three generational crashes.

In the 1920s they had 3 bubbles pop. There was a bond bubble, then a Florida real estate bubble, then the stock bubble. After this you were best to own gold outside the USA.

We have had a real estate bubble, and a stock bubble that needs to pop again, and the bond bubble still has to pop. Then you best be in gold and silver outside the USA.

[Higgenbotham]

In the 1920s they had 3 bubbles pop. There was a bond bubble, then a Florida real estate bubble, then the stock bubble.

Some of this was already discussed a couple hundred pages back. I understand the logic on the surface but don't agree that the 1920s are analogous to the current situation because the debt was not expanded to its absolute limits in all of the market sectors in serial fashion.

When the Florida real estate bubble burst in 1925 there was no systemic nationwide long term impact on the economy/stock market/banking system because the debt was not overly concentrated in the real estate sector. It was regional, much like the speculation in Western land in 1857.

The current situation is that the national economy/stock market/banking system can still be impacted by the bursting of the real estate bubble, which is making its second leg down. In addition to that, the bursting of the first bubble, the technology bubble, as indicated by various measures such as the semiconductor book to bill, may in fact not have hit bottom yet even though it peaked 11 years ago. As an illustration of that concept, semiconductor billings as reported in the semiconductor book to bill have hit bottom so far, not in 2002 or 2003, but in 2009. http://prod.semi.org/en/sites/semi.org/ ... 033815.pdf As a further illustration of that concept, after the technology bubble burst in 2000, the Bank Credit Analyst projected a final Nasdaq low in 2013 by synthesizing three modern bubbles into an average and graphing it. Just as 2 examples. So there can be 3 down waves impacting the markets simultaneously that are all systemic and additive.

But the above is not the primary reason that I am theorizing three generational crashes with the second and most severe one still upcoming. Based on the above logic, the downwaves can proceed without any more generational crashes. It does clarify why the upcoming downwave will be the most severe though - the bubbles are in the third, second, and first stages of bursting, respectively, and will have maximum negative impact when the third bubble bursts. Using the Bank Credit Analyst model, which I think is a good one, this might imply that the economy will bottom 13 years after the bursting of the real estate bubble. Since that bubble was sort of rolling and involved stocks and commodities too, 2020 might be a logical date for a bottom based on this model.

After this you were best to own gold outside the USA.

We have had a real estate bubble, and a stock bubble that needs to pop again, and the bond bubble still has to pop. Then you best be in gold and silver outside the USA.

I'm not sure why gold would have to be stored outside the US. For example, anybody with a post hole digger can build a fence or a deck and securely concrete their gold into a post 4 feet under the ground. If they're really paranoid, they can spread their gold out between multiple posts.

It's my best guess at present that the time to buy gold and silver will be when the second generational panic reaches its momentum low, but not its price low, which will likely come later. This could be sometime in 2012.