Forget about the bull market. Just forget about it. We are officially on the “other side of the mountain”, with steep losses in all of the global growth names. Before we can say “the uptrend is intact,” there is a lot of work to be done.
So, for the sakes of keeping things simple, I am assuming the primary trend is lower, with an emphasis on deflation. Regardless of where you stand on the ever cumbersome inflation versus deflation debate, one thing is abundantly clear: the market fears “the Big D” way more than a little i. This is why treasuries are rallying and commodity stocks are being poleaxed. The worst case scenario, for the market architects, is to see their fraud unveiled, vis a vis sovereign debt defaults.
It’s very easy to paper over some bullshit mortgages. But, it’s not so easy to ignore the entire EU collapsing before our eyes. Who do you think loaned out all of the money to the PiiGS?
Answer: French and German banks, who are all intertwined with U.S. banks. The whole thing is connected.
For the foreseeable future, I suggest that you monitor the bond marker very closely. On The PPT, I update fellow gentlemen on the CDS market. And, I put together a Risk Appetite Index (RAI), which was designed for a market just like this. I want to know, before retail, where there is stress and I want to know right away. Here is a screen shot of the RAI:
(NOTE: The RAI is comprised by using a multitude of publicly traded bond funds, both domestic and foreign. I’ve compared this to the Markit CDX index and it definitely compares quite well.)
I will play this market accordingly:
Assume the primary trend is lower.
Do not press shorts, when extreme OVERSOLD conditions persist. Central Banks tend to do outlandish shit when markets crap out.
Play the upside, in a measured and fast way, even if that means going long 2-3x ETF’s for the sake of expediency.
Stay hedged, at all times, even if that means eating monstrous losses. Nothing is guaranteed, including the apocalypse.
Utilize The PPT‘s algorithms to help identify specific overbought/sold ranges.
Top picks: Short MET, AFL
A Flashback to the bear market days of 2008. Note the orange tone to the site.
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FIRST POST!
again!!
where’s ma cookie?
Shit, 2nd post… steak knives again !
…… 15 minutes later…
geez..You’ve left them speechless…or…they swallowed thier tongues…….
MEDIC!!!
Time to make like a bear:
http://ibankcoin.com/woodshedderblog/2010/06/06/a-macro-look-at-the-market-technicals/
Go visit Wood. He is the best at identifying pivot points in the market. He beat me to the bear and the bull by a few weeks.
Thanks, Flyseph.
Shit, some other #’d post…..Hugh Hendry dance lessons…
Very good post Fly
The Europeans have proven their ignorance in handeling crisis… they should give Ben Bernanke a call for some advice
I made all of the comments BOLD, AND MORE.
Fly:
I really don’t understand why the market was spooked by the bad employment numbers though. Let me explain. Anyone old enough the recall the early 90’s recession will also remember the Clinton jobless growth period that went on from 1992 to 1996, so Friday’s number doesn’t phase me all that much.
Europe is something to worry about, however I still think they’ll print the money and buy the bonds of the PIGSHITTERS. It would also be in Germany’s interest to do so as their banking system would be ripped apart by these fuckers.
Not doubting you downward prognosis though.
J
Even still, where does it say that printing money will lead to higher stock prices?
2009 Bullmarket says printing money creates higher stock prices
Not in real terms it doesn’t I agree. However in nominal terms there could be a case. Perhaps. Dunno. I’m just thinking out aloud.
Wrong. 2009 was all about recovery. You can’t just paper over shit forever
Is it truly “different this time?”
Cry havoc and let slip the dogs of war
Sorry for the cliche but is seems appropriate
I haven’t been this rev’d up since Nov 2008-Mar 2009
IMHO China Gov is the only one that can at least slow this down after Euro Stimulus was only a one day event (btw Sean over at live tonight mentioned that a German article indicated that the Germany Ct MAY hear a case regarding a Challenge of Germany entering into the agreement)….China said in the past that they would step in and support copper…will be watching for that,so far it appears it will be hitting daily limit on Shanghai futures, also with alll the “concerns” that China Banks have been having..IMHO it may not be So Much 2009 Trillion thing. ALSO watch the 30 year US this week, last month it was weak fwiw…………………………and I was so hoping Euro Trash could save the day….lol, ouch
Nope, I don’t feel the love ala 2009 from China…http://www.china.org.cn/world/2010-06/07/content_20197981.htm
Didn’t you hear about tomorrow’s emergency Fed meeting?… Hmmm, emergency Fed meeting coming the day after the G-20? Can you say coordinated Global Central Bank bear massacre? Yep. I betchu anything that Helicopter Bennie is gonna reinstate QE tomorrow morning and absolutely destroy those foolish enough to be short.
Get ready for a Monday melt-up courtesy of the Bernanke put. 🙂
I love the smell of burning shorts in the morning.
And now Hungary is backpedaling…
http://www.businessweek.com/news/2010-06-07/hungary-reverses-default-talk-after-market-scare-update1-.html
oh pshaw.
If I were a betting man I’d go ape shit short Euro markets via EPV, next on that list would be short GDX and IYR.
Inflationist’s are missing the key point that QE money needs to multiply at the bank level. Without robust lending there is no inflation regardless of the enormous QE ($1Trillion) which is sitting in the bank coffers. This money needs to flow to individuals and businesses via 10:1 leverage ($10Trillion)and then you have something going. This scenario will eventually happen but it hasn’t even begun yet. Banks are not lending for three reasons; 1-They are making free money courtesy of the FED..No incentive to lend. 2-Lending regulations have gotten far more stringent and most importantly, 3-the pool of borrowers has shrunk drastically
If these next few months turn out as bad as I think for the market/economy then we will get the global CB’s go haywire with QE and in 2 short years a $ will be worth 1/10th of what it is now in terms of purchasing power.
This might sound too simplistic but it is that simple!
FED needs this bout of current deflation as a pretext to PRINT just like little bush needed 911 as a pretext for Iraq invasion! One might ask; why is it that the FED/Treasury with the help of GS/JPM/MS was able to rally the markets nearly 80% in the face of nasty fundamentals and now all of the sudden they can’t do it? It might be that now they need some nastiness as justification for QE so they can carry on their master plan, inflate our financial problems away!
In the end, hyperinflation is not nearly as bad/disruptive as most believe and compared to deflation/depression, it’s a dream solution. Yes, the fixed income holders and people depending on gov. entitlements get royally fucked but is far better than a complete collapse that Depression would bring!
It’s all good. This too shall pass and our country will emerge as a far more superior superpower than we have enjoyed in the last 100 years. People who think that china will be the new global leader are ENORMOUSLY naïve!
The bursting of the credit bubble leads to deflation. We already are seeing that, as loan collateral is falling in value. This results in forced liquidations as debt gets repaid or defaulted on, thus taking “money” out of the system. This feeds on itself as bankruptcies increase as well as a loss of confidence.
What we are seeing now is the opposite of inflation.
By the way, for those wondering about buying gold…..gold is more about preserving a store of value, not about making money on inflation or deflation. It’s the “go to” money that the markets have decided on as the store of value for the past five thousand years. Get some.
Inflationist’s are missing the key point that QE money needs to multiply at the bank level.
Nonsense. Buying enough of those junk bonds in an unsterilized fashion will do the trick.
You’re sssuming there’s sufficient issuance and demand, no?
No really.. I’m just assuming that the ECB can buy a large parcel of the PIgshitters bonds in the same way that the Fed bought crap also unsterilized.
Eggsactly. We are not talking about new issue, but the absorption of the crap that’s out there already.
______________
“Buying enough of those junk bonds in an unsterilized fashion will do the trick”
This scenario will have a very small impact. For price inflation to emerge, money, in abundance, has to reach the end consumer. Buying junk bonds will possibly inflate junk bonds and a small amnt of this money will trickle down, not sufficient to induce wholesale inflation.
At best this scenario will ease the ‘deleveraging’ which is inherently deflationary but not create inflation.
Our relative standard of living (and our superpower status) is tied to the fact that the USD is the world’s reserve currency. The dollar would not survive your scenario as the reserve currency and so we are unlikely to emerge a more super superpower – as you have suggested.
So…..pray tell……..Assuming the US$ will fail in the test of reserve currency, which of the existing world currencies could be assumed to take its position? From where I sit, it would still be the greenback due to the fact that it will remain the best option even though it is trashed. The only other option is complete abandonment of all existing currency and the institution of a worldwide “new money”, backed by the strong arm of the new world government to which all countries must submit. George Soros will be the first “fearless leader”.
In the land of the blind, the one eyed man is king.
Do you really think that a USD that lost 90% of its value in two years (as Joe suggested) would still be the world’s reserve currency? You and Joe underestimate how disruptive that would be.
“Our relative standard of living (and our superpower status) is tied to the fact that the USD is the world’s reserve currency”
Having had the USD as the world currency has been a factor but a small one in making US the superpower that it is. There are far more salient reasons why the US has emerged to what it is.
Abundant natural resources, melting pot factor (ability to lure in the smartest rejects from the rest of the globe) National psychology…we as a nation are the most adept people at accepting and thriving with changes…and finally the largest fighting machine the world has ever seen since Achilles:)
Now I am sure most will say that the reason we have been able to acquire this fighting machine is due to the fact that the USD was a world currency. True to some extent, but the question is this, Why is it that the USD became the world currency to begin with? Besides, Germany before WW2 managed to build their infamous war machine in the face of enormous inflation.
The point is this; The hyperinflation that I am talking about will happen globally, meaning that it is a zero sum game. Besides, look at the hyperinflationary cases world-wide, Eastern Europe, Argentina…they manage within a few short years to get their house in order as they inflate away their debt loads which are enormous burdens on the economy.
Fly bottom?
Markets didn’t even open yet.
Am I the only disappointed there is no cartoon tonight?
Perhaps a mid-week special as Europe dissolves into anarchy…
Inflation or deflation, the Fly will make money.
We’ve got simultaneous inflation & deflation. Justs depends on what you look at.
imwo Net deflation for now, net inflation later
Inflation requires an increase in demand
or
a decrease in supply that is faster than the decrease in demand
or
a combination of those
The RAI sounds like a cool tool, but you (or one of your factotums) misspelled “technical” in the left pane.
“I am 100 percent sure that the United States will go into hyperinflation. The problem with government debt growing so much is that when the time will come and the Fed should increase interest rates, they will be very reluctant to do so and so inflation will start to accelerate.”
Marc Faber
http://science.nasa.gov/science-news/science-at-nasa/2010/04jun_swef/
NASA confirms Billy Meier warning of intense solar activity in 2012 & possible disruptive activity on earth’s communications & electronics grids.
http://www.futureofmankind.co.uk/Billy_Meier/2012
Regarding the Mayan calendar it must be said that the year 2012 will bring a whole series of quite special events, to which the central star of our system, our sun, will contribute its share, because on the sun’s surface violent outbursts will occur and sun storms are caused, which will be very intense and will influence Earth’s geomagnetic balance.
Through the very strong X-rays falling down on Earth, the magnetic field can suffer from very strong fluctuations. And through geomagnetic storms, power supplies and all electronic appliances can collapse, also those in the satellites, and the ISS may also suffer great damage or may even have a complete (power) failure. Such solar storms may lead to enormous natural catastrophes, and in a worst-case scenario, to a polarity reversal of the Earth’s magnetic field. What has to be said also is that such solar storms are forming up to a climax in an exact rhythm of eleven years, which is a normal occurrence, but in the year 2012 it may happen in an extraordinary magnitude. The Earth will fall victim to a very strong bombardment of hard radiation, which may have a very negative effect on the Earth’s ozone layer.
Due to the entire resulting process, nitric oxides and acid rain can be formed worldwide, which may have evil and devastating effects on the entire plant life. The enormous solar eruptions can lead to further very strong climate changes and, with it, to immense droughts, bad weather, volcanic eruptions, earthquakes, crop failure and, therefore, to even greater famines than have existed up to now. Besides all this, the year 2012 brings other unpleasant events, like e.g. an unknown, invisible, dark and huge space wanderer that is threatening from the fringe of our solar system and could wreak tremendous havoc regarding Earth.
And if this should really occur, the fact of its existence would be openly proven starting with 2010 or 2011, if at all, because the possibility of a “dark” and, therefore, non-observable passage of the colossus is also possible. Besides, all kinds of unpleasant machinations regarding discord, worldwide heavy warlike actions, as well as increasing degeneracy and excessive human ways of behaviour are threatening for the year 2012, whereby all those things are especially evil.
The end is near. God hates the rich. You can’t take it with you. Send all your money to me and set yourselves free.
No cartoon? Aww..
Here are some names…Illinois, Detroit, California, New York and the list goes on…
Does this mean your original target of Dow 9900 – as the best buying opportunity of the year – is out the window? Do you have a new target?
Weekly Euro/Yen cross in an absolute freefall, indicating that traders are betting on the EU’s breakup.
Capital markets have morphed into casinos for large pools of money.
Keep your balls covered.
The gulf oil leak.
Anyone wanna guess how much oil has leaked… It’s a real, real lot right? Like it’s humongous amount, right?
The estimate is around 12,000 to 100,000 barrels. Even at 100,000 barrels that works out to around 8.5 Olympic sized swimming pools. I suppose it’s bad if it gets on a nice beach, but otherwise, big fucking deal. this is more a scare campaign than anything else.
J,
They were saying 10,000 barrels… per day.