Roger McNamee of Elevation Partners is concerned about the market : “It just seems to me that there is a lot of chaos in the world and the rate of chaos is increasing a lot, and to me, that just makes me incredibly nervous,” McNamee, a managing director and co-founder of venture capital firm Elevation Partners, said on “Squawk Alley.” “It doesn’t change how I feel about individual stocks. What it does is it changes how much exposure to the market I want to have.”
Chaos? Lets review what Roger is talking about.
1) Ukraine situation- CIA/State Department orchestrated coup in February to place Neo-Nazis in control. Putin has taken issue with this turn of events and is making moves to invade Eastern Ukraine. He is also perturbed about a possible false flag with the MH17 event and the increased sanctions from the US/EU. Putin has decided to dedollarize as quickly as possible and to form the BRICs bank as an alternative. This is the real reason for the US increasing sanctions.
2) ISIS- CIA/Saudi/Mossad backed rebels that have mutated from Al Qaeda Syrian freedom fighters into a crazed Christian beheading “caliphate” running through Iraq. Their weapons were provided by the US via the Libyan embassy in Benghazi. Now we have the usual Senators running around the Sunday talk shows talking about ISIS coming to the US and attacking us with Nukes. More terrorist boogie men to scare us. Apparently the trillions we have spent on DHS can’t possibly stop this or maybe as a better idea we should stop the black ops that are funding these punks. Obama has decided to bomb ISIS. How does one bomb a group that you are secretly funding? Answer: very carefully. If we wanted to take these devils out we could get the job done in about 2 days.
3) Israel/Gaza- Tribal warfare with no end in site. Very destabilizing to the region.
4) Border Crisis- Apparently “children” (13-18 years old and mostly male) are streaming across the border and DHS is secretly flying them around the country into States that don’t want them or in many cases don’t even know they have arrived. The influx of these illegal aliens is taxing the local and national resources and making our borders porous and very dangerous.
5) Ebola- Potential pandemic that the WHO has essentially said is getting out of control and threatens to curb travel and commerce should the governments of the world overreact. I personally believe that much of the information we are getting from both the MSM and the alternative media is fear porn. Reality check: Less than 3,000 deaths since 1976 from Ebola while the flu kills 200,000 to 500,000 people worldwide annually.
The powers that be would love to be able to take cover and point to one of these mostly manufactured crises and blame the coming melt down on one or all of the above. But make no mistake the meltdown that is coming is due to the pending end of the super credit cycle. What should scare investors the most is this chart of the growth in the debt of the US:
The banking crisis was merely transferred onto the balance sheet of Uncle Sam. The above graph is parabolic. All parabolic structures eventually unwind. The timing of the unwind is unclear but some cracks are starting to appear. Lately credit spreads have started to widen and that has been the real cause of the correction in the equity markets. The balance sheet of Corporate America has re-levered to fund useful things like buying back stock at all time highs and I think the credit markets are starting to get a little indigestion.
Our leaders on both sides of the isle are mostly imbeciles, psychopaths and narcissists. They will do anything to stay in power and continue the status quo. It does not take a genius to see that the center can not hold and it is not a question of if but when the ponzi scheme implodes. Roger is right, the rate of Chaos seems to be increasing. The question we should all be asking is why and is it a coincidence?
In the very near term we likely rally for a week or two but I am expecting continued weakness into the Fall. Too many people have de-risked of late so a brief rally would be in order. 54 trading days until the end of tapering!
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When you present a chart spanning 120 years of history and don’t use a logarithmic scale, that’s not helping you look objective and unbiased.
000,
If you have a better one I would gladly swap it out. Likely still parabolic. Best
Don’t get me wrong, I fully agree the chart belongs in your analysis. I’m just saying the linear scale invites the (wrongful in your case) impression of deliberate dishonesty.
US GDP has a similar parabolic look to it especially if you skew the scale on the axis’ in order to heighten the parabolic look. Seems a little disingenuous when the years 1900 to 1940 reflect little to no data and then squeeze them into a much smaller space than is represented on the vertical. I’m not arguing the data, just the presentation.
000,
Put in one that starts in the 70’s
mrboulders,
I put in new one. Point is we have doubled debt in five years since the crisis which suggests a blow off top.
To give credit where credit is due: I think your analysis of the Ukraine situation has been and continues to be spot on.
Although I do think Putin’s goons shot down MH17 as opposed to it being false flag. Doesn’t change the overall story.
nice summary – it will be interesting to see what the QE program buys us in the end; so far it has helped a limping economy recover, but not sure we are gettng our money’s worth out if it. Still much better than austerity would have been
Another good post..
I think we rally into the 1970 area (ESU4) where sellers are likely positioned .. then we’ll see what happens..
not sure why this signals a blow off top anymore today than it has in the last 4 years when a similarly parabolic chart could have been produced at any point along the way. While I don’t disagree that the debt is a situation that will not easily go away, I fail to see how it has a predictive nature in terms of picking market tops. It’s like trying to drive while looking in the rearview mirror.
Top (or bottom) picking, continues to be a waste of time until you actually get it right. In the meantime, opportunities abound, in either direction.
Hey Blue,
what do you think of LULU going forward here?
Thanks!
From one former recovering PM to another, outstanding observations and kudos for laying it all on the table Straight!
Mr. Boulders,
You are correct this chart will not pick the top. But maybe you have not noticed but most people are not booking the gains that they did last year. The market is in the process of topping and when it is complete it will begin a rather quick painful descent with counter trend rallies. The rally in stocks has been fueled by credit and when the marginal utility of debt starts to go negative the market will go south. The sign posts are there.
Charttradetr555,
The stock appears to be making higher highs and higher lows. I think we are good here.
Pelicanbrief,
Thanks.
JB,
I agree.
It’s posts like this that make me cringe Bluestar. Did you base your investments on these kinds of wild conspiracy theories? This useless nonsense is clouding your process and I’m assuming it clouded your process when you were a large cap growth manager as well. There is always some pocket of the world that you can point to as a reason to be scared, or sell every asset you own because EVERYTHING IS GOING TO COLLAPSE!!!! I guess that’s what makes a market though. As long as their are paranoid participants scaring people into oblivion, the wall of worry will continue to grow, and the markets will continue to go along (up) without you. I mean CIA/Mossad/Freemason/Lizard People starting coups in Europe, backing terrorist groups which are crucifying people in the middle east, just so the Fed can buy more treasury bonds? Are you f-ing serious?
At what point would you consider enterrng the short position if you’re bear and think we’re going higher for weeks.
ForgetAlpha,
Take a chill pill. Have you been using LSD? Free masons, Lizard people? The fact that you don’t know what ISIS is exposes you as an uniformed tool. By the way the market won’t go down because of any of this stuff I posted. My point was this will be used as an excuse should we top out soon. We will top because it is time and credit starts to contract. I have math and cycles on my side. You keep forgetting that I am not a perma bear. Also maybe you have not noticed but the market is barely up this year and we have negative divergences everywhere. The average hedge fund is up 1%. So good luck being long. Apparently you don’t like my posts maybe you should stop reading them.
Q,
It depends on how we go higher. If we go higher and fail soon then I would short. If we go to new highs the topping process has a little further to go. The set up I am looking for is still in place. The reason I am concerned is that we are long in the tooth from a cycle perspective. The two longest 4 year cycle advances were in 1987 and 2007 both clocking in at 60 months. We are currently in month 64 which is a new record.
Blue:
regarding your cycle length:
Jesse Felder @jessefelder · 35m
“Either the 64th or 65th month from a major low topped the D-J Industrials in 1929, the Japanese Nikkei Index in 1989, and the NDX in 2000”
bc21,
I have seen this analysis before. These were not 4 year cycles exactly meaning the count was wrong. However, What is interesting is the steep angle ascent of those markets began and ended in 64 months. What is very powerful is that you have both a 64 month count and a potential four year cycle top occurring at the same time. It remains to be seen but I believe the top in the DOW may have been July 16th. How this rally unfolds is key. I am expecting the rally to fail sometime next week. I will likely be putting on some index puts at that time.
Bluestar –
You noted that you were going to reach out to “the king of coal investing”. What’s the word?
Hey Blue,
How do you feel about Zu?
Fryguy,
They are in the process of bottoming. He is a buyer as long as balance sheet is good. The problem is that these stocks may be dead money for awhile and he agrees with that assessment. My guess is that these stock will fly if republicans take the senate and it looks like they can take presidency. The EPA and Obama are trying to bankrupt coal. King of coal is more patient than most and usually early.
stockchart101,
I don’t have an opinion.
Best
Blue:
I believe he grabbed the quote from this article by Jeff Saut:
http://buzz.minyanville.com/twitterShare.action?KDxrkrODtj7yfwLxoEN7BCx0ylwKUXHw+K6ByHQLpHLfphWRSqR53xnfvK8Tut2r
bc21,
Check this out. http://news.goldseek.com/GoldSeek/1395775253.php
Blue:
That’s pretty interesting! remarkable how many events have followed the same timeline.
BC21,
I am a fundamental stock picker but at market turns none of that stuff matters. Thats why most fundamental active managers suck. They never look at the higher degree trends. I am a big believer in cycles and the natural ebb and flow of markets. The Fed is fighting mother nature here. I think we know who will win. Stay frosty I think we are close.
Blue:
i agree. that’s why i’ve been keeping a diary the last few years. so many things have gone contrary to everything i’ve been taught/studied. i believe it is attributable to what you just mentioned.
will do. appreciate the input.
Blue:
just one more side note. may be of interest checking out this site for info relating cycle changes also.
http://solarcycles.net/
BC21,
Thanks. I try not to use too many things. i just look at price, time and market internals.
It’s one thing that all of the bloggers here, save fly, are random guys with no street experience spouting off opinions. I can accept the misguided ideas they pass on as “active blogging content”.
You, however, don’t get a pass. You should know better than to post this fucking drivel. I find it hard to believe you produced any consistent “analysis” at your prior firm based on the garbage you pass off as research. Maybe recycling tropes from ZeroHedge is why you were shown the door and not recruited to another position at a competing firm?
In the future, whenever the market tops, there will be “news” that is explained as the reason. What a load. Where is all this fundamental BS you claim you are expert in? We’d rather read that. You self admittedly have no macro econ background, but that’s all you post about, on a daytrading website no less.
Thanks for the coal note Blue. If I had to pick, it would be CNX but I somewhat agree with your cycle thesis and would like to see how the sector responds to falling market.
Mr. Davidson,
I was about to write some drivel about my accomplishments but really who gives a shit. I don’t need to prove a thing to you. Let me make this simple for you. QE IS ENDING IN 50 TRADING DAYS! THE MARKET WILL GO DOWN! If I offend you please move along. Such anger.
fryguy,
ANR is a 10 bagger if it can survive. Big if. If we were not looking into the abyss I would actually being doing real work on ANR.
Topping is a process and I am in no rush.. nice writing blue.
I know what ISIS is Bluestar, and my comments about Freemasons and Lizard People was aimed at mocking your assertion that these maniacs are somehow all CIA orchestrated plots to put “Nazis” in power in Ukraine, and behead people in the middle east. If you think that all of the time you spent detailing these inane conspiracy theories will be used as excuses for why the market goes down, then why spend the effort going into details about these unsubstantiated claims that only ZH would uphold. You say you’re not a permabear, which may be true, but the majority of your posts going into great length trying to explain why this market is heading lower, yet you don’t offer much of any real investment advice. The market is going lower at some point? Thanks, very helpful. You’re a talented writer and you know you’re stuff when it comes to other tenets of the market, but none of that seems to generate any investment advice. Whats your time frame? What kind of trader/investor are you talking to? When are you going to put on your index puts (even though your posts earlier in the year said you already had them on)? What are you going to do in the mean time, sit in cash? If you are managing a black swan fund, then your analysis could make sense, but for the 99% of investors who don’t or shouldn’t invest like that, then these blanket market calls don’t make any sense to me. Sure it may be entertaining, and well written, but at the end of the day, isn’t that what ZH is for?
I do like reading your posts because some of them offer some solid, tangible knowledge. But ones like this just go off the deep end.
ForgetAlpha,
I guess you are the blog police or The Fly in disguise. When I was managing long only money I experienced two train wrecks. 2000 and 2007. The best one can do as long only manager is go to 5% max cash and buy stuff that you think won’t go down as much the market. How fucking stupid is that! When you manage institutional money you are not making an allocation decision. I would put that trade on and put my feet up on my desk for about a year because fundamental analysis is useless and a waste of time. Its all about beta and factor risk. I see another train wreck coming. So yes my investment advice is a large allocation of cash rather than experience a drawdown. Regarding my analysis of the situations above I have done the work and my interpretation is way closer to the truth than the MSM. Apparently conspiracy theories are now short hand for unspeakable truth. The term conspiracy theory is used by intellectually lazy zombies to try and discredit their opponents. If you get your understanding of international politics from Fox news and CNN you are just clueless. And yes about a third of the current Ukraine government are neo-nazis that were used as strong men in the coup and were rewarded for it with a seat at the table. Zero Hedge is entertaining but they have no clue how markets and cycles work. If you listened to them you have been bearish since 2009. Thanks for the compliments about my writing. Sometimes the best thing to do in investing is absolutely nothing at all. If you are The Fly just bash me in the open. Thanks!
Ok ,now I am befuddled ….I always thought you are the fly in disguise !
Mr. Partridge..Such a long and silly process :-). BlueStar, I am a bit surprised that he isn’t focused on IMHO the most important thing. China Commodities. Since 2009 I have been watching this Chinese Copper Bubble build and build, thinking it would be a great way to learn first hand the anatomy of a bubble. It, I believe is finally popping and will end our bull run. We saw the first hints when the Port Scandal broke in Feb and everything sold off, now we have went thru the dead cat bounce and should continue our way down. Dr. Copper is weak and foreign money is suing to recover money on loans instead of lending to china using commodity collateral after the scandal. With no liquidity in China, we see weaker China data, less china money buying up high end real estate around the world, less investments in the global markets. All a House of Cards, which as we both agree started late December to unfold when big money started to leave the house. Such a long topping process..
Trading Nymph,
I don’t talk about commodities only because I want to keep the message simple. But yes commodities are predicting a great deflation that will work its way into the stock market. Jesse Livermore who was long stocks in 1929 got short in the summer because he saw what was happening to commodities. It is a sign of liquidity leaving the capital markets.
1929 had a copper bubble too. 🙂
Great post. Always like reading your stuff. What do you recommend as a course of action over the next few months? I am unwinding into this blow off rally and am looking for new strategies for the remainder of the year. I do not think long equities will work at all, unless it is commidity/agriculture exposed. Any potential intermediate term ideas besides obvious puts on HLF?
Thegamethorist,
I am mostly cash. Short some LVS. Chart is awful and Macau numbers decelerating big time. Once the market gets going to downside this will look like a waterfall.
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