# Opinions vary... An alternative view on the markets



## kahuna1 (29 October 2011)

Its been a while :}

Markets ... basically even more worried for the future despite the Greek solution overnight. Longer term it was a pimple in the overall situation and does everyone everywhere take a haircut ? 

The total debt problem even for the EU worries me ... for the USA the official debt at 14.2 trill ... the measures to date budget ones there don't even come close to addressing the problem. Real hard debt scary at 40 plus trillion if not even higher via Medicare stuff. They need to slash this exposure .... 
Even when I go ok they radically cut exposure social security and cut benefits and raise the retirement age which they seriously have to ... current social security liability somewhere around 13.6 trill ... cut it to 6. Likely via raising the retirement age to 70 if not 75 !! 
Still have unfunded govt benefits pensions at 4 trill plus their medical plans 1 trill ... if they really slash the contingent liability of Medicare and Medicaid ... in its present form something like 60-70 trill ... slash it to 10 ... Basically you get sick and its tuff .. . and then the cost of the bailout of the financial sector at somewhere around 2 trill. The total of the unspoken stuff .... currently say 80 trill ... after massive cuts and ones govt. will serve one term on ... the lowest I can see it going is Soc Sec 6 + Govt employee 5 + Medical 10 + Bailout 2 = 33 trill. Add this to 14 its 47 trill, 
This is after insane slashes and cuts all over the place ... raising retirement age to 70 in 15 years for social sec ... reducing payouts ... medical side just awful cuts. 

So ... hmm sorry rambling ....  Lets pretend the US govt is a household.
Current 
US tax revenue 2.17 trill 
Budget 3.82 trill 
Deficit 1.65 trill 
Recent proposed tax cuts 0.35 trill 
Numbers don't work out ~~~ !!! 

Slash it down to a household budget 
take lots of zero's off it ... 
Revenue 21,700 
Spending 38,200 
New onto credit card each year 16,500 
Already owing on credit card 142,700. 
Budget cuts $385- 

Make sense ????  Doesn't to me. 
When I add the rest of the unspoken but very real debts and obligations the US has ... even the massive slashing I am talking about which aint going to happen 
How can they even ever repay this debt ? Let alone the 33 trill extra ? 

Its insane 
Revenue 21,700- 
Debt 472,700- and this is very much cut down !! Right now if unchanged its about 40 trill higher via Medicare  or 750,000 debt vs income of 21,700. 
HOW DO YOU REPAY A DEBT OF $472,000- with an income of $21,700- ?  

HOW LONG WOULD THIS TAKE ? 

AT even 2% the interest alone is over 33% of your income.

If the market decided to charge a real rate of return such as one 2% over the inflation rate of 4% right now it would be 120% of household income.

Even if they decided to go nuts and try and repay it or reduce it allocating 40% of all income to the problem it would take 150 years to get it back to zero. That is if the market was willing to get negative real returns !!! 
If allowed and the market is allowing it AT PRESENT ... The US is understating their real inflation picture by 2% or so which erodes the value of the real debt and has to date been able to borrow at insane rates which guarantee holders of us bonds take a real loss if held to maturity on a 10 year bond of 25% on official inflation rates and likely 50% in purchasing power at the end of the term.

Does this lovely state of affairs continue ? As someone who have been involved in financial markets and bond markets for nearly 30 years there is a simple rule. When inflation is eroding the real value of your money and purchasing power YOUR AN IDIOT NOT TO DEMAND A HIGHER RATE OF RETURN  ... VIA  INTEREST RATE to compensate you for the high rate of inflation. 
Sobering stuff. 

Just worries me as the USA eventually has to give a haircut to everyone ... when the market wakes up to this eventually bond rates will go nuts as they should have already. Opposite of course has happened to bonds and the lesson with Greece and many of the past Mexico three times I can remember Russia ... Argentina Brazil and a long list ... seems to have been lost at present in the market.  

The USA is paying 2% for 10 year bonds when the inflation rate the official one is approaching 4% and likely real rate is MUCH higher. In other words investors are willing to earn and loose 25% of their money on official inflation numbers and likely loose 50% of their purchasing power over the course of a 10 year bond. 

Is this how the USA deflates its way out of debt ?  I do strongly suspect at some stage maybe not next week or even next year the market DEMANDS what it should already be getting. What happens to equities with rising interest rates when the US fed runs out of ammo is pretty obvious, 
Suspect maybe a bit more this rally 4,500-4,550 on the ASX 200 but for me have to not be invested much up there as the overall picture is quite sobering. 

Clapping our hands as the Greek situation is resolved when the overall situation is a government debt and obligations right now of around 200 trillion vs the 100 billion just solved. This is including all EU and UK and Japanese and US problems as they stand. In other words 1/2000 th of the problem solved and it inspired the market. Happy for it to continue for a while but not inspired longer term.

On one hand China and emerging nations keep going despite the doomsdayers predicting a crash and since 1990 I have heard at least two predictions about China each and every year. During the GFC what happen to them ? Nothing. Second tier ones like Indonesia enjoyed a 5.5% GPD growth during the worst of it. 
Sadly with over 6.9 billion people on the planet and about to hit 7 billion the emerging nations with low per capita GDP will keep growing as they aspire to become western consumers. 

Demographics of the developed nations is that the percentage of people over 65 and drawing on pensions in the USA will go from 12.3% in 2010 to over 21% in 2030. In other words the number will rise 70% and pressures on the unfunded Medicaid and Medicare will crush the living daylights out of them. As for the social security hole at 13.6 trillion even raising the retirement age to 70 will still have it at 9 trillion and I used the age of 72 to come up with my best case for them at a hard debt of 6 trillion.

Australia will of course fare better than this as this sort of debt is not even a decent fraction of GDP vs the real US one at 300% of GDP. As to the aging population with our underpopulated nation and immigration we actually have some years a decent percentage arriving in net migration and likely to rise to around 0.5% of our overall population by 2015. Yes we will also have an aging population but the rate will be far less than the USA.

All of this is still the old game of musical chairs and when the music stops as it will again I do wonder what the outcome will be. Given the devaluation in real terms of US dollars and likely at some stage implosion of US and others debt I would prefer to be holding hard assets but none of them attract me at this stage and shall wait till the wheels fall off again.

Cash is king for short term, but longer term not sure cash will be worth much especially US Dollars. It is the last place I really want to be but right now have little choice. Getting a safe 6% vs bloated asset prices on real estate leaves me wondering what was learnt via the USA and UK and EU debacles. Eventually this state of unreal affairs has to end. When it does I would like to see a real rate of return on bonds for EU and USA charged. Holders of Greek debt just lost 50% of their investment. US bonds and given the picture painted above leaves me gasping for air. 
At some stage I want to buy into a business via shares that can adjust its prices according to inflation but pay about 33% less than current levels. Call me greedy but this GFC  continues on its merry way and eventually as was the case late 2007 someone will blink. 

Debating about the scale of the oncoming debt disaster a waste of time. Numbers on Medicaid and Medicare liabilities along with social security and unfunded US pensions for govt workers pretty well known. 
This is the first time in recorded history a borrower has been able not only to pay negative real interest rates for any period of time but also dramatically increase the amount of its actual borrowings along with it. Neither makes sense and these things having seen around 15 of them over the course of the last 29 years  end badly. This one is on a scale that would make the high flyers of the late 1980's and early 1990's very proud. The NASDAQ at 5,000 vs its low nearly 80% lower a few years latter comes to mind. 

Would love to see another few %% on the upside to exit everything other than ultra conservative shares. 

Have fun 

Mark 

Written yesterday morning. Obviously the close was nearly 2% lower than the highs and happy to have taken some risk off the tables. Still of the same view the 4,500-4,550 should contain the upside on the ASX 200 if we get there for now. US problem being ignored as per normal and the musical chairs continues.


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## satanoperca (29 October 2011)

*Re: Opinions vary ... An alternative view on the markets.*

Could not agree more.

The figures are scarey and sooner or later will come to pass.

Cheers


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## professor_frink (29 October 2011)

kahuna1 said:


> ............
> So ... hmm sorry rambling ....  Lets pretend the US govt is a household.
> ..................




The US govt isn't a household so there's really not much point in crunching the numbers like they are


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## So_Cynical (29 October 2011)

The US can make big savings cutting the military budget, will be exiting Iraq over the next 12 months and Afghanistan in 2 or 3 years..the US also has low tax rates for the rich and few consumption related taxes so lots of scope to raise revenue there.


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## kahuna1 (29 October 2011)

The US govt isn't a household so there's really not much point in crunching the numbers like they are 

?????

Call them whatever you might ... goverment ... a business whatever.

If it makes no sense to you to actually looking at the ability of any entity whether it be a goverment or company to finance or repay debt .... I am lost as to why you might be interested in finance or financial markets at all.

Goverments and goverment policy via both fiscal and monetary policy actually influence where markets go. When a nation backs itself into a fiscal hole ... and unless your suggesting the USA with 250% plus of GDP debt and obligations is not there .... and adding another 10% of GDP each year to the total and soon to grow to 25% as the demographics change and more pressure mounts on those unfunded sectors of their obligations ..social security .... means not a lot ... Well as I said opinions vary.

US money spent in and on the military ....  is around 660 billion. Even were this cut in half .... which is totally unlikely the savings of 330 billion ... vs a deficit of 5 times this again not the answer to the problem. 

Back to my sandpit


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## tech/a (29 October 2011)

Much will be written off
Greece bonds were devalued 50%

There is no way for any of us the know the truth
Positive or negative.
All speculation.


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## Mrmagoo (30 October 2011)

This debt has not appeared over night and the domestic-on the ground US economy has been toasted for a long time, the UK is possbily worse. 

This is not the first time a country has been in a huge amout of debt and keep in mind we've all been fighting several wars without tax increases.


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## robusta (30 October 2011)

This is the best video I have seen on the European situation.

http://www.youtube.com/watch?v=5D0VhS8qXT0


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## Agentm (30 October 2011)

i kinda like this one

its as clear as it can get, if you dont get this one then nothing will get through imho!!

all we need to do is believe in fairy tales and follow the fancy that someone else, persons unknown, are going to come up with "1 trillion dollars" and bail out the current debt

and we have many PIIGS to go still with far more frightening debt to come

just kick the can down the road and enjoy the ride and be on the right side of the trade when it hits the fan

lol


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## kahuna1 (1 November 2011)

Just did a bit of work on this ...

Govements ... and trating them like a business and found the COB does produce the numbers I was mumbling about ...


Anyhow ... topic asked about selling US assets to pay down the debt or obligations. 

Can US sell goverment owned assets ? To pay down this debt ?

Well at first glance NO ... second and third NO.

Unlike Australia they privitized a lot of public things long before we did from Phones to Banks so there is no magic sale of a telstra out there. Scarily and I say this with no malice involved they are in such a deep hole I see no way out NONE.

There is no magic cure other than what I have suggested. Telstra for example represented about 10% of our own GDP when sold off and that was the extent of our problem. Right now our welth fund they created from some of this and surpluses is around 80 billion or 6% of GPD. 

There is of course a lot of assets any goverment holds and could sell if needed but to compare real assets in Australia vs those in the USA the sums come up weirdly short. We had a whole list of assets they sold in the 1990's and beyond that repaired the damage from CBA to Telstra to state banks and various other electricity and water infastrucure things. The USA on the main sold these a long time ago.

When looking at recent debates on selling assets of the US goverment they are talking about things which you just cant sell like gold reserves or foreign reserves and even if they did the actual amount was 10% of the official debt of 14.27 trillion for these things so raising 1-2 trillion but cutting your own throat in the process was and is not an option.

I talk about real debt and real obligations ..... GDP 14 trill debt official 14 trill ... actual real debt if we used offical accounting stnadards and obligations as they stand right now ? WELL OVER 70 TRILLION !!! or 5 times GDP.

Simply put it would take 50 telstra type sales to get rid of it all. Things they are talking about as up for sale in reality are not possible to sell ... such as national parks and various other things. Sure they could have a fire sale of various goverment assets and likely raise a fair bit but we are talking fractions.

If you want reality ... buried deep withing budget papers is the real deficit vs the reported one.

In 2008 the offical US goverment federal deficit was 455 billion ... when they used the same accounting standards as every other comapny is forced to use the actual deficit including obligations not paid for via social security, medicaid, medicare , govt pensions ect ect ... WHAT WAS THE REAL DEFICIT ? US 5.1 trillion or 40% of GDP.

Does this scare you ? 

It does me. 

http://theeconomiccollapseblog.com/archive...s-national-debt

Add the 2009 + 2010 + 2011 fiasco's where not a cent has gone to these obligations and hence the reason why my estimate and concern pre GFC 1 ... at the level of real debt being 40 trillion plus via these unfunded obligations and why now I suspect via non funding and 20 trill real obligations run up plus inflation at near 4% ... leaves me with a sobering number near 70 trillion.

What assets can the US sell to meet this sort of number ? It doesn't have them frankly.

Weird thing is we in Australia get junked with the USA and their problems but a funny thing is that the goverment here Federal goverment in relaity owns massive assets which would blow your mind. 

I still cant find the 2009 Gaap aaccounting numbers !!! let alone 2010.

The CBO ... congressional budget office in 2008 estiamted itself the actual debt and obligations I mumble about at 65 trillion !!!
Thats the goverment itself.

http://www.wnd.com/?pageId=88851

Assets for sale in Australia ... Crown land alone comprises 23% of the whole nation. If you add the fact that most of the country is not owned freehold but under crown leases .... and the Federal goverment actually retains ownership of these lands OWNERSHIP and comprise another 42% of the land mass of our Country ... the grand total is 65% Not held via freehold owned by the goverment of Australia. 

We go to the USA and use the same equations and the grand total all categories comes to 30% . Goverments have to hold these lands for various reasons but they in the main cant be sold in reality.

All an interesting aside I suspect.

Nice to see the US Congressional Budget Office ... COB ... not totally asleep. 

Bingo !!

QUOTE 
American public is largely unaware that the true negative net worth of the federal government reached $76.3 trillion last year.

It exceeds the GPD of the planet by 14 trillion !!!

This is 2010 

http://startthinkingright.wordpress.com/20...-entire-planet/


Sobering thoughts .... for Melbourne cup day.

Maybe they should put a bet on and they can pay it off if they win.

No only solution is massive cuts in outlays of 25-30% ... adding tax take by 25-30% and some serious belt tightening for 10 years.

Good luck

Just lost my lunch reading all this.

Cheers

Mark


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## professor_frink (1 November 2011)

kahuna1 said:


> The US govt isn't a household so there's really not much point in crunching the numbers like they are
> 
> ?????
> 
> ...




I mentioned it because as a government that issues it's own floating fiat currency they aren't constrained in the same way a business is. There's no solvency risk when you have the ability to issue cash at will


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## doctorj (2 November 2011)

Whatever happens, it will certainly be interesting. So far there has been two different trains of thought. In the UK and Europe they've spent a lot of time talking about austerity and bringing down sovereign debt to more manageable levels. In the US, they've taken some measures to reduce the deficit, but the government is for the most part still spending.

Time will tell what works best. I'm beginning to wonder if perhaps the US approach was better - and it appears UK politicians are starting to wonder the same. I think it's important to differentiate between the short term and the medium/long term. 

In the long term, Debt/GDP levels are too high in the UK and the US. In the short term, this doesn't really matter as long as you have the liquidity to make the repayments and have a plan for the long term. If the market doesn't think you're able to fix it in the long term, your long run problem will quickly become a short run problem as the market drives up yields and effectively prices you out of refinancing (see Greece).

So the question is how to fix the long run. If the relevant measurement is debt to gdp, you can strive to either reduce debt (e.g. UK) or increase GDP (e.g. US). This is why I'm beginning to wonder if reducing debt through austerity is a dangerous strategy as you threaten GDP growth - so even if you reduce the absolute amount of your debt, you could still end up with a high level of debt on a relative basis. So if you're a country with your own currency (particularly if that currency is a reserve currency), follow Keynes and spend in the short run on infrastructure and the like and work out a plan to deal with structural deficit reduction in the long run. What matters in the short run is not your debt levels but the market's confidence in your ability to repay (or refinance)!.


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## kahuna1 (2 November 2011)

professor_frink said:


> I mentioned it because as a government that issues it's own floating fiat currency they aren't constrained in the same way a business is. There's no solvency risk when you have the ability to issue cash at will




Hi there,

Yep I get your view ... and the markets. It is however a real debt .. a real obligation and as the baby boomers retire and draw on their savings and demand the governments promised benefits via pensions .. social security and medical care the real numbers are by 2025 the total take of US tax federal side right now will be paid out on just these three items.

Solvency risk when you just print money I suppose is not there but they cannot print this much. We are talking over 5 times the total GPD for the USA and more than the GDP of the world.

At some stage someone blinks and when it happens it will be fast and many will say it was out of the blue yet the numbers are fairly clear.

Japan has the highest official GDP to Debt ratio of developed nations at 240% of GDP. Its seen as a low risk for default as most of this debt is held internally. USA on the other hand is relying on world capital markets to fund this debt and ongoing at an ever increasing pace.

When you essentially need to double or triple the amount of debt you are holding over say a 15 year period and this is an at best scenario with massive cuts .... there frankly is not enough free capital or savings out there to even fill this void. 

I have no idea how this will be filled but the USA relies on the good will of nations to buy their bonds and fund this debt ... sadly they have little intention or ability to repay it or address the problem. Printing US dollars has worked on little stuff and the official debt ect and playing with 500 billion - 1 trillion a year. Sad thing is official and real debt is going up 5 times this amount each year and the market is baulking at this and has little ability to absorb any more of this let alone doing it on a scale much larger.

Eventually creditor nations will put their money somewhere else into other assets or currencies simple as that. Already we have seen this and will continue to see much of the same as time goes on.

No idea how this unfolds or unravels but it is a real debt via accounting standards and if they debase the value of the US dollar via printing money the problem still will remain for US consumers and savers with their money in US dollars the retirement funds they had set aside will have much less purchasing power than before.

My gut tells me eventually the US bond market stops being supported for this mountain of debt and no matter what the US fed pulls or tries the long US bond rate rises as it should to reflect this loss of purchasing power via inflation or debasing of their currency. 

Only time will tell


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## craft (9 November 2011)

Hi No. 1 Kahuna

The US undoubtedly has a projected US fiscal Imbalance.  However it is not in my view that the deficits will inevitability persist and be funded via external debt.


The US has a GDP per capita of around $48,000. Any inability to balance the budget and share the spoils in a sort of equitable way is simply a lack of political will at these income levels. 

If US can’t find the political will to balance the budget then the market will eventually impose restraints as the external debt grows – However I think there is a lot of headroom left yet.

US External debt is currently around 14 point something trillion as is their GDP, giving them an external debt to GDP ratio of approx 100%.  The debt however is just one side of the balance sheet. If you bring in the external assets then the US net international investment position is around negative $2,471.0 billion.  

This is a NIIP to GDP of around 17%. This figure is not very demanding. In comparison for example, Australia’s NIIP to GDP is running around 60%. In addition the makeup of the external assets and liabilities and their associated revenue /expense means that the US actually runs a Net Income surplus which goes towards offsetting the trade deficits. Australia in comparison runs a 3-4% Net Income deficit.

Further more changes in capital values which are not included in the Current Account Balance work in favour of any country whose currency is depreciating.

In short. US external debt position is relatively healthy at the moment and given the mess of some other countries it is not that surprising to see the markets pricing sovereign debt as they are. 

In the long run however the forecast US Fiscal deficit is not sustainable. No matter how the parts move in the short run – long term if you continue to spend more then you earn you will eventually be destitute. 

For me the real question regarding the US is what impact does balancing the fiscal position have on growth?  Placing/funding its debt is not the current concern and won’t be unless the fiscal can is kicked down the road to such an extent that funding the future deficits causes the NIIP/GDP to balloon and create a substantial Net Income deficit. 

Australia is walking much closer to the external debt cliff edge at the moment then is the US. The hand rail protecting us was ‘Made in China’ Hope it is up to spec.


Opinions vary!


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## kahuna1 (10 November 2011)

craft said:


> Hi No. 1 Kahuna
> 
> The US undoubtedly has a projected US fiscal Imbalance.  However it is not in my view that the deficits will inevitability persist and be funded via external debt.
> 
> ...




Great post.

Many thanks.

Yep opinions vary ....

the net numbers look fine even to me and yes agree the Australian one more than the US ... and always has been for some simple reasons ... as you say we have ourselves mortgaged to the China boom. Largest expansion in capacity on the resource side ever seen. 

Lots of other reasons and more about structural nature of Australia and who owns what utilities as opposed to say the USA and how they are funded.

All somewhat an aside.

Simple maths ... the total US deficit exceeds the TOTAL global trade surplus of every nation on the planet and is increasing not decreasing. Sure that ratio looks fine ....

The US is however demanding 100% and more of the free capital of the planet and is prepared to pay less not more for this. Only time will tell of course which way it breaks.

Expansions in our mining industry alone are right now 134 billion or about 10% of GDP.

We are exposed very much so to the China story ... these ratio's and trade numbers have been hammered for the last few years as long term expansion projects are being set up. Pluto and all the LNG gas ones ... expansions by BHP and RIO and FMG in iron ore just to mention a few. 

When on line if the house of cards holds together which i suspect it does the current account of 2011 vs that of 2020 will be interesting to say the least. Exporting another 250 mt of iron ore alone even at $100- a ton .... a mere 25 billion plus ... the LNG expansions of Pluto Wheatstone Gorgon and others dwarf even this about another 60 billion a year. Add  a few ones if Olympic dam ever gets going ... 5 bill  ... the numbers are staggering on projections. Our terms of trade are about to be turned on its head .... as long as the story remains the same.

With 7 billion now on the planet and China a big factor that every man and its dog has predicted stops at least 20 times in the past 20 years I suspect it doesn't. then those outside China large but growing nations from Indoesia to Brazil and India to Phillipines and Vietnam and Turkey ... should be an interesting time.

I cant see any ray of hope on the US side. And yes agree our accounts and demand for debt not great however being repaired and over time will be repaired as more and more via the 9% super contributions hits savings vs spending I have not too many concerns even short term on our accounts. 

As you say opinions vary.

But when one nation demands 100% of the supply of something and says it will pay less ... as the USA is doing and hopes to continue to do ... it aint never ever going to work.


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## Knobby22 (10 November 2011)

They could increase the tax rate and wipe out some of the amazing loopholes that the US has.

If you earn over $150,000 in the US and pay more tax than your personal secretary, you're just not trying.

There is plenty of wealth, the Feds just aren't getting any of it.


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## craft (10 November 2011)

Hi Kahuna1

Opinions do vary – including mine on a regular basis as I try to understand all the complexity and factor in different possibilities that could arise in an unknowable future. So please take my posts as discussion rather than arguing a particular position.



kahuna1 said:


> Sure that ratio looks fine ....




Yes I’m fairly comfortable with the *current* position. The projection is not good though, based on their current tax and transfer system settings. But with a GDP per capita of $48,000 they have plenty of scope to move. As Knobby put it, there is plenty of wealth, they just have to legislate to bring in more taxes and/or cut back on their promises. 

I think it is unlikely that they will continue a fiscal deficit to the point of incurring prohibitive default yields in their debt pricing. 

The question for me is what impact does balancing the fiscal positions have on growth. The current deficit is adding a lot of stimulus to offset the deleveraging in the private sector, without it growth tanks. That maybe not such a bad thing as we live on a planet with finite resources, but a change in growth expectations would trigger revaluations.




kahuna1 said:


> Simple maths ... the total US deficit exceeds the TOTAL global trade surplus of every nation on the planet and is increasing not decreasing. Sure that ratio looks fine ....
> 
> The US is however demanding 100% and more of the free capital of the planet and is prepared to pay less not more for this. Only time will tell of course which way it breaks.




I think I have my head around how trade surpluses and the foreign reserves derived by these surpluses have acted to be the driver for global credit growth - but I do not understand why you believe deficit financing would be limited to global trade surpluses.

Bigger picture though – I do think global credit creation is slowing since (caused) the GFC and whilst I have argued that US will not in the short term face a larger default yield on their borrowings I do think that scarcity of credit could  start to lift debt yields – but subdued until an expectation of growth or inflation re-emerges.

Australia – in contrast to US has a projection that looks good but a starting point with external debt that is not a strong.  If the two countries defy their outlooks then Aus underperforms an optimistic outlook whilst the US outperform a pessimistic outlook.  Plenty of Risk/Return implications to consider there.


Cheers


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## Mistagear (10 November 2011)

kahuna1 said:


> G
> 
> As you say opinions vary.
> 
> But when one nation demands 100% of the supply of something and says it will pay less ... as the USA is doing and hopes to continue to do ... it aint never ever going to work.





The world economy is a giant Ponzi scheme and the US has been a 3rd world economy for years but they dont know it yet, so what.
There is only one thing a trader can do about it, Trade the chart !

K1, you do a lot of thinking and pondering and whilst it may sound good, its all just a waste of time because sentiment drives markets, not fundamentals.
Keep trading the SPI buddy and stop worrying about the rest.


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## Ves (10 November 2011)

Mistagear said:


> K1, you do a lot of thinking and pondering and whilst it may sound good, its all just a waste of time because sentiment drives markets, not fundamentals.
> Keep trading the SPI buddy and stop worrying about the rest.



 But what causes sentiment? Charts?


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## pixel (10 November 2011)

Ves said:


> But what causes sentiment? Charts?



As a first stab I'd suggest it's media reports that can influence sentiment. So, where do media "ralking heads" get their wisdom? Apart from making it up - as many do on the fly - reporters listen to other media types; the Internet offers a wide variety of ideas that can be plagiarised - oops! "researched" is the preferred word.
 For a purist Trader like Mista, that question doesn't arise. Instead, the Trader asks "How can I detect sentiment, measure its momentum and direction, and take advantage of it?"
Add vectors; determine price, volume, and duration; then take profit and move on to the next.


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## Boggo (10 November 2011)

pixel said:


> Instead, the Trader asks "How can I detect *sentiment*, measure its momentum and direction, and take advantage of it?"
> Add vectors; determine price, volume, *and duration*; then take profit and move on to the next.




And be able to know where there may be be a target level for the current sentiment, or be able to recognise a change in sentiment and what might be the target/duration of the change of sentiment.
Sounds complex but the KISS principle is always the foundation.


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## Mistagear (10 November 2011)

Ves said:


> But what causes sentiment? Charts?




Sentiment drives markets, charts show sentiment..

buy it when it stops going down, sell it when it stops going up.
hang on to your winners as long as you can, cut your losers as soon as you can.
When a ladder turns into a snake, get out

What more do you need ?

PS. dont average down !!!!


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## Julia (10 November 2011)

Mistagear said:


> Sentiment drives markets, charts show sentiment..
> 
> buy it when it stops going down, sell it when it stops going up.
> hang on to your winners as long as you can, cut your losers as soon as you can.
> ...



Great summary.


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## kahuna1 (11 November 2011)

Mistagear said:


> K1, you do a lot of thinking and pondering and whilst it may sound good, its all just a waste of time because sentiment drives markets, not fundamentals.
> Keep trading the SPI buddy and stop worrying about the rest.




Haha ...

This is where we never saw eye to eye :}

I agree sentiment drives markets short term. Long term fundamentals always drive markets ... always. If we are both in agreement the thing is a ponzi scheme which we are ... both of us should eventually be 100% cash.

I look at the overall picture as you know and dont focus too much on the charts as you do. If the overall market is going up most stocks actually go up. In a downward market 95% of all stocks will fall. Buying a stock in a market thats running into one of those brick walls I just love and mentioned at the start of this thread might work for a while as the individual momentum takes them higher ... but with odds of 95/5 against you in a falling market even I dont bother.

Top end of the market and we have tried it a few times on the ASX 200 ... 4,350 ... and thought it had some momentum when we got there and possibly to 4,500-4,550. It stopped flat one day just above 4,417 and closed below the magical top 4,353 was the close that day.

Not happy to own stocks up there and whilst we are still supported and dont doubt they have a nibble at the topside even the 4,500-4,550 barriers ... fundamentals have me spooked. 

Technically the day the ASX 200 hit the low 3,765 it was an exact point low point and having seen the market try this top a few times 4,350 ... and fail the high is 15% plus below where we went. 

Not amused with the news and schemes going on in the EU let alone the UK or USA or Japan. These are fundamentals yep I know. Sad thing is for spec stocks they tend to do about double the overall markets fall when they correct and with most 30-40% off their lows not for me. Even bigger pets of mine the banks not taking a 25% bounce just not my style.

Sadly suspect via fundamentals at some stage we visit lower.

Sentiment and momentum right now quite bullish which is fine and dandy by me.

Some stocks I of course will just hold either way due to income and the fact that getting an effective 10% plus with dividends vs 6% in the bank and likely lower rates as the thing unfolds makes me just have to own them. Not too many in this category but will be I suppose 30% invested when set. 

I dont know what the eventual low will be but its always funny it tends to stop at a chart point. the low GFC was an exact point that was a 75 % retracement of the 15 year high low of 6,851 vs 1,814 .... = 3,074 and another very similar support level the 20 year high low and 6,851 vs 1,149 = 3,088 a 66% retracement in that case.

For me big ones  support 

3,775 

3,400 ish

3,075 the old low 

And if we visit there they just will not be able to help themselves going for the next one ...

2,550 or an insane 2,100.

I don't know how this unfolds but the pressure on the outside fundamentals again something unseen by me ever. Things not getting better but worse, very much so and personally very happy to take near 6% and see what happens.

Always some idiot calling a crash ... not suggesting we visit the pentultimate lows 2,550 or 2,100 but something has to give and cant see the drivers for a massive rally other than the similar stupid stuff we saw GFC which drove me mad talking 4,000 on a 6,800 market was just that. We had two massive short squeezes on the way down one from 5,200 to 6,000 and then an even bigger one from 5,000 to 6,000 on the ASX 200. It took nearly 12 months for it to hit its pentultimate low but got near there mid November 2008 ... loosing 45% in 6 months.

Of course we are starting at a lot more realisitic level and if we lost 45% from the 4,400 level that magically is the 2,500 scorched earth lows that I cant rule out. No one can realisitcally.

 The only true wisdom is knowing that you know nothing." Socrates

Take care


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## kahuna1 (11 November 2011)

Mistagear said:


> K1, you do a lot of thinking and pondering and whilst it may sound good, its all just a waste of time because sentiment drives markets, not fundamentals.
> Keep trading the SPI buddy and stop worrying about the rest.




Haha ...

This is where we never saw eye to eye :}

I agree sentiment drives markets short term. Long term fundamentals always drive markets ... always. If we are both in agreement the thing is a ponzi scheme which we are ... both of us should eventually be 100% cash.

I look at the overall picture as you know and dont focus too much on the charts as you do. If the overall market is going up most stocks actually go up. In a downward market 95% of all stocks will fall. Buying a stock in a market thats running into one of those brick walls I just love and mentioned at the start of this thread might work for a while as the individual momentum takes them higher ... but with odds of 95/5 against you in a falling market even I dont bother.

Top end of the market and we have tried it a few times on the ASX 200 ... 4,350 ... and thought it had some momentum when we got there and possibly to 4,500-4,550. It stopped flat one day just above 4,417 and closed below the magical top 4,353 was the close that day.

Not happy to own stocks up there and whilst we are still supported and dont doubt they have a nibble at the topside even the 4,500-4,550 barriers ... fundamentals have me spooked. 

Technically the day the ASX 200 hit the low 3,765 it was an exact point low point and having seen the market try this top a few times 4,350 ... and fail the high is 15% plus below where we went. 

Not amused with the news and schemes going on in the EU let alone the UK or USA or Japan. These are fundamentals yep I know. Sad thing is for spec stocks they tend to do about double the overall markets fall when they correct and with most 30-40% off their lows not for me. Even bigger pets of mine the banks not taking a 25% bounce just not my style.

Sadly suspect via fundamentals at some stage we visit lower.

Sentiment and momentum right now quite bullish which is fine and dandy by me.

Some stocks I of course will just hold either way due to income and the fact that getting an effective 10% plus with dividends vs 6% in the bank and likely lower rates as the thing unfolds makes me just have to own them. Not too many in this category but will be I suppose 30% invested when set. 

I dont know what the eventual low will be but its always funny it tends to stop at a chart point. the low GFC was an exact point that was a 75 retracement of the 15 year high low of 6,851 vs 1,814 .... = 3,074 and another very simialr support level the 20 year high low and 6,851 vs 1,149 = 3,088 a 66% retracement in that case.

For me big ones  support 

3,775 

3,400 ish

3,075 the old low 

And if we visit there they just will not be able to help themselves going for the next one ...

2,550 or an insane 2,100.

I don't know how this unfolds but the pressure on the outside fundamentals again something unseen by me ever. Things not getting better but worse and personally very happy to take near 6% and see what happens.

Always some idiot calling a crash ... not suggesting we visit the pentultimate lows 2,550 or 2,100 but something has to give and cant see the drivers for a massive rally other than the similar stupid stuff we saw GFC which drove me mad talking 4,000 on a 6,800 market was just that. We had two massive short squeezes on the way down one from 5,200 to 6,000 and then an even bigger one from 5,000 to 6,000 on the ASX 200. It took nearly 12 months for it to hit its pentultimate low but got near there mid November 2008 ... loosing 45% in 6 months.

Of course we are starting at a lot more realisitic level and if we lost 45% from the 4,400 level that magically is the 2,500 scorched earth lows that I cant rule out. No one can realisitcally.

 The only true wisdom is knowing that you know nothing." Socrates

Take care


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## Ves (11 November 2011)

Mistagear said:


> Sentiment drives markets, charts show sentiment..



You can see sentiment from both a fundamental and a technical standpoint. Charts are not the only way of measuring it. 

But, you still haven't answered what causes sentiment.

Whilst I have plenty of time for your approach, the reason why I asked is because I think that sentiment can also be caused (but not limited to) fundamental analysis or events. Everything in finance has its origins in greed or fear. Sentiment is a reaction to something, it is an effect (or symptom) not a cause. The debt crisis is a fundamental issue.  However, reactions to this can be both rational and irrational (equally in how people buy and sell).

I agree with everything else you have said.


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## Mistagear (22 November 2011)

Ves said:


> You can see sentiment from both a fundamental and a technical standpoint. Charts are not the only way of measuring it.
> 
> But, you still haven't answered what causes sentiment.
> 
> ...




V, 
(sorry for late reply, only saw your post tonight).

You answered your own question, sentiment is the collective of fear/greed/fundamentals/lunar cycles/plus whatever,  who cares what part is dominant because all parts are present at all times to some degree.
You are correct that sentiment is the effect caused by all of the individual actions,  once all contributing components are added together, it is the sum which becomes the sentiment and that is what moves the market.


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## kahuna1 (25 November 2011)

Howdy,

first level support being tested. ASX 200 low 3999 

Glad I exitied out of the dangerous stuff around the brick wall at 4,350 on the ASX 200.

Despite the market overall being 8 % lower and the stocks certainly cheaper we still have if anything more of the same going on via the debacle in the EU and US. US problem is not even being talked about and they cant even agree on cuts which amount to about 5% of what is needed to even balance the budget looking forward.

Interestingly my scenario about bonds seems to be happeneing at least to some extent in the EU with sharp rises in yields whilst they bicker about what is needed to fix the situation.

Not even close to what I suspect may happen eventually mind you. Should be a wild ride either way with the usual massive short squeezes that normally happen in volatile markets. Problem I have with the whole scenario is the fabric of the money markets and bond markets as well as global fiscal restraian has been thrown out the window. Eventually it will end in tears. Suspect this is just a peck on the cheek and when the mess eventually hits the fan .... the 8% lost in two weeks will look tame.

Certainly a lot of money to be made for those brave enough to venture into this mess. Selling options with the volatility up here has been helping yields along even with safety stocks yielding over 8%. Interestingly these things for the last two years have been at best ignored by the market yet in the case of poor old TLS which I liked $3.30 and lower ... just played the ranges with options as well earning 9% dividend and another 5% for selling the calls over the stock a few times plus the dividend is franked the comparative yield has been 15% or more. APA another pet doing well ... others of course have tried my mettle and ended in the dustheap. 

With the USA on thanksgiving holiday and Turkey market in overdrive along with pumkin pie and cranberry sauce nothing is going to happen one might think today despite the very wek futures markets right now.

Next stop the 3,775 old low we had a few months ago .... another around 3,500 likely met if we go that direction.

Might be time for the old relief rally on the other side ... all is well :} The US debacle remains totally off the radar despite the congress and mess the budget is in.

Gotta go catch my turkey !!


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## kahuna1 (30 November 2011)

Whoops did this last night ....

Hillarious,

Us basically put on credit watch by a ratings agency for negative outlook .... whats the market do ? 

Go up of course.

Same games different tunes as GFC 1. Yesterday it was the IMF and Italy thing actually a negative when the IMF says the package is not worth a pinch of salt ...

Whats the market do ? 

Goes up of course.

Not about to argue with these bear squeezes as during the GFC 1 we saw one for 15 % and the market being half 6 months latter and another for well over 10%. ASX 200 went up near 6,000 in a mighty bounce prior to having a cow and going to 3,073. 

In the case of Italy ... their bond yields for Italian issued Euro bonds are nearly 5% over those issued by Germany. Of course given the different economies and debt levels there always has been a premium paid by Italy to issue bonds. This said the spread has quadrupled in 8 months.

http://www.bloomberg.com/quote/!IT10:IND

And its all good news :}

No idea or little care where they take this rally ... I suppose the excuse used was the door stop sales reported as being up yesterday and some hope for the US consumer returning to the fray. When I looked closer at the numbers ... as I tend to ... they interviewed 3,800 shoppers to come up with the sales rise of over 6%. Hmmm 3,800 vs 307 million people or 0.00123%. About one in 99,675 people asked.

Doesn't matter market does what it wants to and its as always interesting to me that the US needs to create just over 150,000 jobs each month just to account for population growth ... the participation rate in the US has not changed in 12 months and the average employed each month ... new jobs has fallen well short of this 150k needed ... yet according to the BLS the actual unemplyment in the USA has fallen from 9.7% to 9%. How this works is again unknown to most 

Simple logic might tell you if you have 2 million more entering the workforce each year they need to create those 150k jobs or the unemployment rate goes up .... as per usual the fibs are getting bigger. If you look closely at the blue line on this chart it shows correctly that the overall unemployment situation is worse ... not better as reported by the BLS. Hard to actually see .... but it is important if the headline reported rate of unemployment has fallen as suggested by the BLS to 9% when the actual rate of unemployment appears to have risen by around 1% ... the real unemployment rate is well above the 9.7% rate from 12 months ago ... and the under employment rate is also above 20%. 

http://www.shadowstats.com/alternate_data/...ployment-charts

I do love statistics especially those produced in the USA as they are better than the big bang theory or modern family.

Enjoy the rally :}


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## kahuna1 (1 December 2011)

Off we go again ....

Good news on one front with China actually easing their credit stance by 50 basis points.

This was not the reason for the rally ... overnight. The US is going to stuff the EU central bank full of USD so it can lend to its banks at a lower rate. Again I suppose a good thing but honestly doesnt alleviate these pressures.

So for EU banks they may get cheaper sources of US dollars ... yes helps their balance sheets. So where are the dollars coming from ? The US fed ...

I still eventually come back to a ponzi scheme where the worst balance sheet of the lot is in the USA and by a very large margin.
So at some stage somewhere in the future the market has to look seriously at the US budget and real economy and go ... gee this doesn't make any sense the deficit is 100% of GDP officially and 400% usuing the actual outlooks and real commitments. No matter what they do it will grow to 200 % by 2020 and at an ever increasing rate after this without radical fiscal action. Radical. 

But that day like most is some day off in the sunshine and market doesn't care.

We touched that support on the ASX 200 at 4,000 and bounced like a superball.

Here we are and like the Australian market yesterday on the close we saw the usual for a month that stocks are down and with the last trading day of the month ... the close involves a magic rally ... we went up half the range as prices were window dressed for month end. Same going on in the US right now on the close for their month of November and yes the news out overnight supports the rally to some extent .... a 4% rally.

Like I pointed out last time we were in a bear market and we still are ... it wasn't the wicked falls that were strange ... they did happen of course but not until the wheels fell off it was these magic rallies and true to form when things looked shocking at that support of 4,000 on the ASX here we are back 5% higher with momentum looking to take out the other end of the range the 4,350 top on the ASX 200.

Of course the 4,250 ish level we shall start the day at today short of that level ... but as I said I was hoping for some momentum to take out the 4,350 level and possibly the 4,500-4,550 so I could just totally exit everything and sit on my hands. I know this will not make me any money but the sad fact despite this and other magic rallies is that the situation and overall fiscal situation vs what it was 6 months ago is far worse not better.

We in Australia ... like China ... have a lot of room to move to stimulate our economy ... this is both on the monetary side by cutting rates from the 4.5% to zero if needed and the fiscal side same sort of stuff ... going nuts like the USA and running a deficit of 10% of the total GDP is how far they are doing it and as yet the dead horse is still stinky over there. China very much same as us ... so calls yet again for them to fall in a heap totally somewhat silly.

US and EU on the other hand are moving one dead body from one place to another. Sure the cheaper US dollars will help the awful state of EU banks ... but we have problems out of every corner not just the commercial side but goverment fiscal debt and budgets are screaming. I do believe the vanilla business of banks borrowing money and lending it 2% or more higher is very valuable. Sadly these trading schemes and loosing the plot on old fashoin banking have seen banks loose every cent ever made on trading for the last 30 years with a few exceptions and thats the Australian banks which learnt their lesson 20 years ago with the 1980,s and 1990's high flyers. 

My concern as always ... is if the market can punish Italian bonds and make them pay 4% above Germans for credit as they should ... the fiscal side of the US to me is even sicker and a 1% rise alone in what is demanded for US bonds would leave the whole ponzi scheme in tatters.

I keep thinking this will happen ... thought it would be the case with GFC 1 ... I could see the ultra poor state of the US banks but thought it eventually caught to the govt side of things. Wrong .... and possibly wrong for some time on this one. I dont know what level the market actually looks at the fiscal situation for the USA and has another cow. THe US senate and goverment is dithering over cuts which equate to about 5% of what is needed. Yes 5% and they still cant even bring themselves to even do this.

Its like watching a slow motion crash .... but as yet ... the focus today is on wrally wrally wrally.

As I typed the US as expected had their window dressing rally and rose over 1% in the last hour of trading.

Shorts must be punished and like the last time if any weakness actually comes into the market there will yet again be calls to ban short selling despite its merits. I fondly remember the US banning short selling GFC 1 in financials and here today we see banks like Citi sitting with a 95% loss vs its high. Pre GFC and spilts the high was over US$550 vs its dismal $28- now .

Yes lets ban short selling Leyhmans a classic ... no you cant go short .... vs 100%.

Only news of merit this week .

China cuts policy stance ... a positive

US to stuff EU central bank full of dollars .... yes a positive ... long term fiscal outlook unchanged 

Finch cutting US outlook credit wise ... a negative . For a ratings agency of any sort to downgrade the USA or put a negative outlook on them as was done is virtually impossible. Its akin to being unpatriotic and why we saw banks which basically went under still with investment grade ratings on their bonds.

Nothing basically new ... window dressing on a grand scale and the magic rally as we saldy see.

Hoping for my Christmas present and totally exiting if we go into the 4,450-4,550 on the ASX and I can exit virtually all holdings and sit on my cash for a while. Happy even at 4.5% or term deposit at 5% plus to take a hiatus for 12 months and just see. 

Merry Christmas to all ... 25 days till Santa :}


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## kahuna1 (2 December 2011)

The Santa Rally.

　

My friend Lizzard and I were having a chat and came up with this. 

Lizzard asked ? 

QUOTE 
Is it November 2007 all over again when we didn’t know why it was being rallied into the face of the storm? Or is it that the market expects a comprehensive dose of amphetamine to be delivered on 10 Dec? Anyway, I’m confused.　

Me too ... 

　

The move via the US fed was basically the US fed bailing out the ECB and liquidity. Does this mean we get one global currency ? I doubt it as the Euro is a flop with 20 different governments and tax regimes and loopholes being played like a violin ,,, on off against the other. I am sure the multi nationals operating in Europe have their Greek office making heaps via lax tax system when their German head office makes not much. 

In the end ... the demand for credit is growing at an explosive rate driven by the fiscal side of things the deficit and bailout programs gone nuts. Why the bond markets improve and even ignore this is because in the end every move is designed to make it so via the central banks. 

If a creditor said that they will only guarantee 20-30% of the face value of bonds now being issued by the EU ... in normal times the interest rate demanded would be 10% plus ... but its less than half that. As for the old USA I do wonder about their accounts and where or when the penny drops. Current projections have the thing at over 200% of GDP by 2020. What I find stunning ... scary and all the rest is that the official debt in 2006 was 8.6 trill its now 15.1 trill. 

Simple stuff the number has grown by 40% ... inflation has gone UP ... not down ... yet the cost of these borrowings has gone down. Also the chance of default or partial via haircut is at least 20 times if not 100 times more likely ... and again the cost for the US government of borrowing has gone down. 

All three factors ... inflation .. chance of default ... total demand for a product .... have gone one way and should indicate a higher price, or in this case yield demanded to lend, for things yet the actual price as always defying logic. 

Since the dawn of time money lenders have always increased the price for any of these three factors and just one normally would send the market into a tailspin let alone all three. I do think the inflation pressures may abate if things fall apart but the fact the US is just printing money and debasing their own currencies value even has me wondering about this. 

Chance of default as we look forward is not going to go down, but up, especially for the US as these unfunded government obligations come due and the baby boomers retire in millions pre 2020. The social security system and Medicare and Medicaid as it stands will bankrupt them alone with 100% of all tax receipts being needed to pay out these benefits as they stand in less than 10 years. This is even if the US congress passes the cuts supposedly on the table. They equate to about 10% of the budget each year when these pressures will amount to a 60% increase in obligations. The CBO ... congressional budget office is well aware that the proposals as they stand are at best window dressing. 

In some ways its like the bankrupt idiot driving a Porsche to impress the neighbours. Was the US bailing out the ECB just that ? Given their own fiscal state my view is yes.

So just leaves the last factor and chance of default at some stage. Given this and as silly as it sounds for the USA to be at risk of default or demanding a haircut on its bonds ... if Greece can do it ... and the EU obviously thinking of others Italy Spain and other pigs that might and if they are only guaranteeing 30% of the face value of new bonds issued ... anything can go. 

As per normal keep looking at the same stuff over and over again and coming up with the same conclusions. In the case of bonds and credit all three factors pointing one way vs the markets direction and central banks intervention forcing it that way. Basically dont like bonds. 

Anyhow hoping for that extra 2/3/4/5 % on the ASX 200 and an I wish to 4,350 on the ASX 200 if not the next levels up near 4,500 and exit stage left. 

Still thinking of holding some but becoming less amused as the prices rise so two biggest holds TLS and APA massive yielders but APA higher than pre GFC1 and if price of credit goes up it will come down. If market overall peaks same thing. Have a few banks left ... all of them ... but want this all gone if we get there and will just stay cash and wait. 

Might be the wrong move but for me ... when I have one factor pointing in one direction its good for a stock say 10% have two its 25% ... have three and its usually 40% if not more. Here we have all three underlying things for bonds pointing to higher yields which will not be good for borrowers ... banks ... leveraged ones .... or stocks ... yet the stock market not worried about the state of affairs.

Will get off my soapbox till something changes.

I do however humbly point out as always .... Over the years I commented on such diverse things as the AUD at 65 cents and it only had one way to go. Oil at US$40- same thing same logic. Uranium at its peak, ASX at 6,800 same thing and same logic all applied. Same results Oil at $130- opposite view .... Been wrong on bonds as the central banks have all ganged up to flood the market with cash but the three factors all perfectly aligned. If its not bonds some release valve is going to totally blow. They cant and will not cut spending or address tax rises needed to try and balance the books .... 

When we have demand exploding, supply in reality shrinking due to the fact the demand exceeds total supply by about a factor of two and future demand larger than what can possibly be met. Prices have little choice longer term. 

Then again ... 

"The only true wisdom is knowing that you know nothing." Socrates

　

Merry Christmas to all.


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## BradK (2 December 2011)

Welcome back Mark. Always good to read your posts.


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## sptrawler (2 December 2011)

Great posta kahuna1, much appreciated.


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## pixel (3 December 2011)

sptrawler said:


> Great posta kahuna1, much appreciated.



 +1
Thanks K1


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## kahuna1 (12 December 2011)

Hi,

Honestly I thought a factor in all the collapse from GFC 1 ... to where we are now would be the bond side.
It has been ... and it hasn't been.

Strange comment but we have seen the prices demanded to invest in second tier bonds explode in some cases and in the case of Greece fall totally apart. On the other hand the liquidity measures taken by the band leaders the USA and Germany on behalf of the EU have seen the bonds issued by both remain intact. In fact the reality that rates will remin low for some time has seen them rally when others have actually totally fallen out of bed.

Does the next leg down if it happens ... get driven by a bond yield rising driving up the cost of borrowing ? Given they have held it together till now ... I don't know. Personally and its a personal observation ... when goverments are demanding more and more of the total free capital ... the value of paper money is falling due to the fact that the central banks are just priniting it to keep the market awash ... I thought it would have happened prior to now. During GFC 1 ... things went very close to total shutdown with everyone refusing to lend to each other and only the drastic action of central banks doing what their primary function is at times like this is ... be the lender of last resort stopped a total meldown in 2007/8/9. I suppose they will be able to avert this yet again ... but this said the reality for borrowers outside the central bank cabal is they are facing increased costs. If one actually notes recent moves via rating agencies even goverments are being downgraded and the USA itself put on negative credit watch.

When we have these goverments demanding 80% of the free capital then 90% then 100% then 110% ... eventually it will become a competition for funds ... or so I thought ... until they all just went lets print money out of thin air.

This does nothing other than relieve maybe the liquidity but still the debts created remain and at some stage need to be repaid.

In many ways the whole thing is a dirty little game. The US is and has been without a doubt playing with statistics and understating its unemployment by a serious factor. When you have population growth of 2 million a year they need to employ 150k plus new people each and every month just to keep unemployment stable. The numbers fall well short of this and still we see the reported headline unemployment fall. yes last number the participation rate fell .... but not by much. I doubt having looked hard the real unemplyment situation in the USA has changed one iota in the past 2 years. 

Next we see the same with inflation over there and whilst house prices remain mushy the cost of living via every measure has been rising as the low value of the USD has hit import prices and energy prices eventually have caught up with the rises seen 2004-2009 and on top of this some local charges have risen to try and balance budgets on a local govt side and state side. Yet despite this the same is going on as was the case pre GFC and the real inflation was understated by around 2.5% a year. If they can keep doing this the real debt will be debased over a period of time. Doesn't help the 80 million Americans ... baby boomers about to retire and go onto inflation linked payments via social security or pensions.

Understating the inflation side ... overstates the GDP by a similar amount and the real GDP growth is negative I suspect not postive.

Add to the mix the debt side is frankly out fo control and growing over there ... overspending 10% of their GDP in a federal budget deficit ...

To me there are so many factors longer term that just do not add up.

Dont add up at all.

Sure we may very well have some sort of a rally .... but with not one ... not two but 5 different factors pointing one way and only one saving grace the other side ... or two ... goverment overspending and ultra low rates ... both of which eventually have to halt ... any rally for me is eventually going to peter out.

The scope of the fiscal side measures needed ... and yes this is fundamental mumbo jumbo that may or may not take hold ... eventually it will ... it has to. A house with an income of 20k which owes officially 140k on credit cards and is really owing 400k on credit cards ... which instead of spending less than its official income of 20k is adding to its overall debt at the rate of another 18k each year doesn't sound like much but where does it end ? 

In simple terms the tax raised by the US federal system needs to rise from 2 trillion to near 3 trillion or by nearly 50% from the low levels charged right now. Spending needs to fall from the 3.8 trillion or 1.8 trillion deficit to something like 2.5 trillion or less to meet the deficit ... so right now ... taxes need to be raised by about 40% .... 40% and spending needs to be slashed by 40% ...

Both sides ...

Draconian measures are needed to be taken. None of which is about to happen ... the measures which have been dillied and dallied and fought over tooth and nail in the US congress and senate account for 5% of a very much needed 80% change and they cant even do that let alone something that is needed on ascale at least 10 times if not 15 times larger.

The goverments by playing with inflation numbers understating them and overstating GDP ... may hope they can via deflating the real value of the debt by understaing inflation by 2-3% a year make the debt pile dissapear. Saldy it would take 10 or 20 years to make this meaningful and it will not hold together that long. This also is if they take stern fiscal measures to balance budgets looking forward. The EU has been forced to take some of these measures and will have very slow and low GDP for some years. The US has taken none of these measures.

Cracks already appearing in the picture as I said with ratings agencies downgrading everyone and everyone ... from countries to banks. This will force up the price of money longer term as it should. Banks which are solvent over here are being squeezed on their margins as they have to pay a higher price to borrow and as such pass it on to the borrowers. Ratings agencies were made to look worthless and idiots GFC1 with some having banks with investment grade ratings which went insolvent and broke days latter. The ratings agencies are paid not by govements but by banks and investment houses so its always a catch 22 as to having the fox looking after the henhouse. Whilst a goverment of a nation always should have a higher investment rating than individual companies within that nation .... so a bank in the USA cannot have a higher rating than the goverment ... I am wondering if this is even correct given the fiscal debacle overseas. The goverment of Greece just handed out a 50% haircut to bondholders but I am very sure a lot of Greek based companies were and did not do the same with their debt. Perverse thing is each of these companies which will presumably repay their debt vs the 50% written off by the goverment ... actually every one fo them had a lower credit rating than the goverment of Greece.

Does this fallacy continue ? I dont know but not sure that the credit rating of Australian banks should have been cut of late vs the overseas ones. We are a pimple in the overall equation and if ... if the resource side falls apart ... it will be a very interesting ride.

Having commented last year when the RBA raised the rates Melbourne cup day I thought the last rise was a big mistake ... from 4.5% to 4.75% ... we sat there for 12 months ... now the RBA is in retreat mode and two cuts in two months ... and market pricing in a few more in 2012 .... we have so much room to move in that area vs the US or EU its a joke. We could cut 13 more times !! And on the fiscal side the goverment is still talking balancing the budget in 2012/13 .... vs the US spending about 10% of their total GDP over and above reciepts. If our govt only did half of this if it was needed ... and went to a 60 billion deficit ... it would be about $2,800 for every man woman and child spent. Our overall debt situaion with no nasty hidden debt it really is insane the ratings agencies and their actions downgrading us of late.

QUOTE 
The Gross Australian federal debt as at 30 September 2011 was AUD$208.992 billion, with a net debt position of $80 billion, or 6% of GDP
http://en.wikipedia.org/wiki/Australian_national_debt

This compares with the USA offical one at 110% of GDP and with unreported contingent liabilities ... real ones via social security and medicaide and medicare making it 300% of GDP or 50 times our size.

I scratch my head at times like this and wonder. Anything and I mean anything can and will happen. 

Cant rule anything out on the fundamental sice as it is frankly totally insane. 

Something somewhere has to give one might think.

Is this going to lead to some magic rally ? These sorts of overseas inspired pressures ? I am not sure it does. Eventually lenders to these out of control debts have to demand higher yields to lend as the size increases as does the risk of non repayment. 

Only time will tell . 

Marry christmas and good luck for 2012


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## notting (12 December 2011)

> Mr. Obama sees retaining the stability of markets and the confidence of investors as a primary goal of government and a prerequisite for achieving any major changes in public policy. Mrs. Merkel views the financial industry with profound skepticism and argues, in almost moralistic fashion, that real change is impossible unless lenders and borrowers pay a high price for their mistakes. http://www.cnbc.com/id/45630431




Short term or long term? That is the question.

Markets will force a short term move that will be required to prevent collapse.
ECB will have to print, whether they do it in a dramatic move to inspire markets or just do it on the sly as has been done a little to date is also a possible uninspiring bumbling along possibility.


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## kahuna1 (21 December 2011)

Well its almost time for Santa.

Market yet again stalled at the 4,350 level and flopped as the Euro plan was rubbished.

As per normal the games played out in the market still controlled not by humans but the old high frequency trading programs. RBA cuts rates here again second time in two months ... What does the market do ? Goes down of course. Same thing happened last month at the widely expected cut the market closed on its lows.

Out comes a terrible number ... Take your pick ... Consumer sentiment in the toilet the other day  and what does the market do rally.

Just an observation and as a trader for institutions for over 20 years its bonus time. Benchmark is the ASX and if you look back last 10 years there almost always is a rally and it seems to close the month of December near or close to a high. Of course exceptions but too many times out of 10 it closes near the very top. Means little longer term but sitting here in the bottom end  of the months range for the ASX 200 ... 4,335 vs low of 4,050 ... At 4,100 if they can manage a magic rally in December they will certainly give it a shot. Markets will be incredibly thin post 25 Dec and despite looking and feeling skittish from leads overseas they usually have a taste of the bottom ... Shake all the longs followed by a short squeeze irrelevant of any overseas factors. 

Classic of this was Dec 07 they managed to halt the slide for a month ... Only to see the index shredded for 12% in Jan 2008. 

Not much to report on besides I think the EU plan will keep things in mud for years.

Domestically was interested to see the govt is thinking about finally a policy of use it or loose it in regards to offshore oil and gas finds. Some were discovered over 40 years ago !! Gorgon which finally is set to go had a series of proposals to develop which fell through over 10 years ago. WPL's Browse deposit I think discovered in 1974 always stuck out to me. Certainly difficult to develop due to location but always some excuse was used until hey presto Shell gets out of the picture and having tried to take them over twice, and failed ... Asked if it could again and told NO ...  The real deposit is actually going to get developed. Also some other deposits that have sat for 15 years idle magically now are moving. About time.



Meanwhile back at the ranch some worrying signs coming from China of things slowing. Given the like us have their rates high ... Not so worried about this longer term as they can and will lower their rates and reserve requirements at will. Something the EU or US or UK has zero room to move in that direction. So too government spending China can and will boost things via this direction if needed. Again EU and US ... Cant and moving the opposite direction ... Well the EU at least ... Eventually the US follows one way or another.

Still believe top end of things 4,350 ... And maybe if Santa is good 4,500 early new year . Above this levels 4,765 and old highs around 5,000.

BEING REALISTIC ... Some of the reported profit downgrades make any decent rally on the back of fundamentals hard for me to see. Other side of the coin is what I call bulldozing and what we just saw was the overseas market fall 5% and our own go down nearly 7% so any long was bulldozed out of the way. The converse applies and with all longs now either stopped or looking to pull the sell trigger ...its time to whipsaw things the other side ?

May or may not happen ... But I can smell the dealers bonus's and nothing in December should be ruled out :}

Long term given the mess and clear signs of slowing EU and likely to spread ... Not able to see some massive rally myself. Lower end 4,000 support ASX 200 followed by 3,750 ... 3,450 minor 3,070 Big then 2,500 and 2,210. 

On one hand we have lots of room to move monetary policy via the RBA from 4.25% to wherever .. 1% .. . Same govt spending side ... Currency not even a concern still up above $1-. China same scenario if needed. I do wonder what EU and US pull out if needed ? If the EU is going to tighten on the fiscal side as they have said ... Ease on the monetary side as they have done ... Leaves a net zero change to the already shaky state of the economies.

A week ago  RBA deputy warns the EU problems severe and likely spread and what does the market do ? Up of course. On the day !! The market obviously slammed via overseas stuff since then.  He even went and said its likely even to impact our largest trading partners China and the rest of Asia and they will need to commit money to buy EU bonds .... Not a pretty picture pained by the nations number two banker and still it rallied. Just over 0.5% in an hour. Not much but shows who or what is actually running the trading and its not human :} Being an old fart I remember the times from 20 years ago when a similar comment would have sent markets and currencies into a tailspin. AUD barely moved in response.

Of course this did happen the last week ... But its almost a case of do the opposite on the day. 

Despite an ordinary outlook and vast storms on the horizon ... I can feel the rally in my bones taking us closer to the highs this month vs the lows. Only thing that matters is my bonus for 2011 and I will do everything I can to make it as big as possible :}

Anyhow we shall see if the Christmas window dressing ensues.

Long term still very concerned about the overseas factors and see NO way out of them which eventually leads to one of those large corrections. Short term ... Given its bonus time and they even managed to stave the slide off in 2007 ... When it fell 12% the next month ... A nice rally over the next 10 days might be in order.

Merry Christmas


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## kahuna1 (23 December 2011)

Cont ...

Things start slowing down ... Its only going to get worse sadly. Sadly despite thinking they were mad at the time, this scenario has played out time and time again. Asian financial crisis and well run countries held to ransom play forward 15 years and they are the ones who are in great shape. Always if being attacked or things are grim attack someone else !!! Accuse them of something idiotic to delay any reaction. EU and US and Japan are in a hole. It speads and I know without even thinking which markets will be attacked vs the ones that should be. US according to them doesn't even have a budget or debt problem :}

Anyhow convoluted rambling as per normal. Back to that question about house prices and when its the best time to buy ? Well 10% unemployment and 12% interest rates. I suspect house prices will be under 5 times average salary vs buying when we have 5% unemployment and 4.25% interest rates and we see right now the debt ratio having tripled in 15 years . Sure some things keep it afloat and one is the massive population growth here compared to overseas ... Immigrants add a lot to this but when and if things slow a bit so to will this. Oh and the latest Sydney average at $ 600,000-   plus and it ranges from 623k via one to 673k on another. Lots of areas well over the $1- million average ? Sound like my wondering about Miami or areas of San Fran or Vegas ? It should. Different dynamics but if you want to suggest unemployment is going to remain at 5% forever and rates at 4% go right ahead.

Back to the markets ... I still keep being too greedy feeling they have these magic pudding rallies and yet again still have stocks left which I just don't want in 2012 and hoping for the index to have a lovely window dressing of 3/4/5% to take us nearer the 4,350 level vs the low this month which we are a mere 2% away from that and 4% from the highs. I j can just see the instos rubbing their hands over the new Porsche they want and if only we can get the index up a few more %%. Longs were just crushed with out index whipsawed and under performing overseas by 2% on  Monday and Tuesday as they trod on the longs throats. They have this still to play with on the upside and if they can swing it 2% one way over and above the overseas lead they certainly can the other side. 

I want the red Porsche please ... Yes all the extras :} 

Longer term I am hoping for this push and just to exit. Even if wrong on one or two or three of the above factors it still leaves two which alone will provide one of those periodic corrections and a chance to enter the market again. Cycles ...

My own for 2012

Current interest rate one here is DOWN two or three more needed to 3-3.5% ... 

Long term bond rates I believe have BOTTOMED in yield and only one way to go UP

Aussie ... Not so bullish in 2012 but still very long term supported unless the globe doesn't have 7 billion souls. Buy if they go idiotic like GFC 1. Buy 80 cents and slowly below.

House prices ... Well not a big fan of this longer term up here.

Equities ... Same old same old ... But still feel chances of a big washout more than likely. Don't like the storm clouds at all. Range big range 4,650 top vs that low 3,750. Sounds large but when it went 600 points in a week in August ... You get the drift. Chances of old GFC 1 low 3,070 being tested in 2012 a lot higher than the 4,650 being taken out. Chances of two supports below this being taken or tested at 2,500 or 2,200 higher than 5,000. Again not much of a prediction but one is an 850 point rise vs a 1,600 fall and I rate the lower end TWICE as likely as the top end. For me happy to stand aside at 4,300-4,400 if the Porsche eventuates !!

EU and US economies obviously awful and can only improve but very slowly with massive cuts in spending and tax raises ahead ... Very very slowly. US crisis likely as time ticks away.

China and Other tigers ... Chances of slowing I think very high but not by much. China maybe to 6% if EU and US falter. 

Energy ... Not a great fan of this as alternatives, shale gas, CSG, LNG  fast replacing traditional means. Some renewables on the cusp of quantum leaps. 

Metals non precious ... Again rough ride and long term LONG term the demand is going to be there even if China slows and we get trashed. BUY BUY BUY but not till we see them squeal. That day in Aug some fell 25% in two days only to rise 50% in a week. 

Wishing everyone all the best for 2012.


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## kahuna1 (23 December 2011)

Howdy ... And merry Christmas to everyone !!!

Well the markets still stuck in mud and the possibility of the old bonus rally still alive and well. We bottomed on the ASX 200 at 4,050 ish but still in reality not too far out of danger despite what is a positive lead via the overseas guys and likely one third up the range for the month.

Still feel the old magic pudding rally could happen as the traders window dress for their bonus and an ultra thin market for the rest of the year could honestly send it anywhere. As I noted the market end of year tends to have a magic rally even in 2007 so that's the very short term tone. Long term things one hand on the improve in the EU with their funding but totally unaltered on the fiscal side as govts cut spending and raise taxes. Bottom line its going to be long and slow out of this mire for the EU. US still totally mad and talk of extending tax breaks on the already broke social security system I look on as madness. Other side of the coin the tax break if not extended does exactly what I think is needed and takes money to slow the deficit down but slows the US economy. Again a big mess which will take YEARS not weeks or months to repair and any rally no matter how convincing is hard for me to join into.

Same levels on the top and still having a few stocks left for Santa an I wish the old brick wall of 4,350 on the ASX 200. Above that 4,500 and I do think this should stop any madness. Bottom side same old same old 4,000 then 3,750 a few minor ones prior to the GFC 1 low of 3,070 and then major stops below this a nutty 2,500 and then 2,200.

Where we head next two weeks is anyone's call with things thin ... But the tone is certainly a recovery and since liquidity will be ultra thin this could fall in a heap any day. Other side being illiquid we could find ourselves pushed back like the magic rally in October where we gained nearly 8% in a week. Hit my old magic brick wall at 4,350 and poof back to the lower support at 4,000.

Finally the RBA is seeing sense and my old mate John Edwards on the board and whilst not usually a fan of economists this guy is the smartest man in the room. Commented the rate rise in 2010 on Melbourne cup I thought was a big mistake and frankly it was. Suspect they have waited a bit too long to go the other way and lowering them as well. Our GDP growth in the last 12 months frankly sucked. Inflation was not really an issue whilst some things went nuts others fell out of bed. Being able to buy a TV a 60 inch for half what it was 2 years ago helps vs the price of Electricity giving us a shock ever bloody time we get the bill !! 


Cycles and always cycles hence the title of this thread. Something with some I have failed totally with. FAILED ...  Everything has a cycle and the time to buy is when everyone hates things and time to sell is when everyone loves things and entering or playing in between these medium term cycle highs and lows should only be window dressing. 

Medium term being something usually 3 months where things hit one or the other end of a barrier but in these times post GFC2 it can and is sometimes days. In August we hit a strategic low I blabbed about for a long time at 3,750 and holy moly a week latter we were hitting near the magic 4,350. Getting set at the bottom was a chase all the way with the index rising an insane amount on the day. Since then we have been dancing in this range with the low well protected and only one decent sniff at that end and 3 different tries at the top end. 

Pick a commodity or a stock or anything and its the same. Having been on the back of the oil rise but missed the gold ... Was sceptical of Uranium in the extreme until Cigar Lake flooded but then only involved for two plays ....  Nickel played that one till I worked out it was being squeezed by two investment houses cornering the market. Same game different name.

Houses ... We all have an interest. When is the best time to buy a house ? Having been a trader back in the Japanese heyday and watched the UK and HK markets do the same and then followed by the US insanity of late its a decent question for Christmas. When is the best time to buy a house ? For those who followed pre GFC 1 the harder I looked the more I got scared of the US side and simple maths when you have an average income of 50k and an average house price of $1- million in some areas it was nuts. Having large sections with house prices in the 600-700k region about 12-14 times salary ... Madness. I look with trepidation at some Sydney areas and go ... What the !!

My answer to the above is the best time to buy a house is when interest rates are 12% and unemployment is 12%. If one thinks our unemployment rate is going to stay at 5% forever I wish them luck and same for interest rates. The interest rate side is breaking every rule in the book right now since the dawn of time. Not ours, but overseas. The risk of total default is about 10 times what it was 5 years ago. Inflation is higher ... Not lower ... Higher yet interest rates and what should be demanded for lending to reflect the risk along with inflation is LOWER. Makes sense to me ... NOT. Might take weeks for the ponzi scheme to tumble and may take years but it defies logic. 

Back to house prices if you look at the US or EU it only takes one of them to falter and overall unemployment of 10% has sent prices back down into the toilet over there. Our market is not great value at these levels if one looks at it from this perspective. Just an opinion but if you don't expect rates at some stage in the next 15 years to be double what they are now at say 8.5% or unemployment to be close to 10% ... I am not sure you have any idea about economics. Sometimes I do wonder myself if I do :}

Market, well we certainly are not at the same end of the cycle as we were pre GFC1 and the market at 4,100 vs 6,850 is a trillion gazillion miles away from the high. Where is the low ? That's the 99 billion dollar question and whilst it could very well have been seen the reality for me is I suspect we haven't seen it. With the fundamental screws on the fiscal side overseas and the interest rate market totally defying the logic of lending that has been in place for 3,000 years these factors have YET to peter down to company profits. They may and have done a good job on the banks adding liquidity but simple fact is that it doesn't matter. The raft of downgrades on profits seen on the retail side and hoping for things to improve domestically will and always does have a peter down effect. Same being played overseas but even harder environment if possible. 

The linchpin of our domestic index is what ? Banks and the woes overseas have seen a few emerge out the other side like JPM shedding only half of their pre GFC highs vs the normal like BA down about 90% ... Let alone others exited stage left. Any escalation of problems and serious downturn overseas will hit the banks like a ton of bricks. Having played the banks value game the last few years buying ANZ when it has a $20- in front of it and selling it 15-25% higher worked but now wondering about the wisdom of this looking forward. Great dividends and great returns and it was patience and entering and cutting hard that saved the day but I am beginning to wonder longer term.

Does the EU slow some more ? RBA certainly thinks so. The US which is my own pet domain is trying to stay afloat with concrete shoes on. China and the other tigers can and will continue I suspect on their merry way as they did GFC 1.  China not even pausing for breath ! Our market gets spooked when it only grows 9% and might fall to 8%. Compound that for 5 years and they will be nearly 50% bigger ... 9 years double. Indonesia which had 5.5% GDP growth during the GFC same thing along with a lot of others which themselves as a block make another China. Some in this second block are India Vietnam Philippines Brazil Indonesia and so on. So we in fact have two sets of backups not just China growing vs muck from the EU and US and Japan a basket case. 

Chances of say China and its GDP going up 2% from here  vs it falling back to even 6% for a year or two if the EU and US have to curtail things is very possible. Chances of at some stage our own blissful employment scenario not going so well again very possible some time in the future. Chances whilst at this stage not yet to happen of borrowers being actually charged the correct premium via higher interest rates to borrow funds is a very real one. Chances of the actual value of real money in the EU and US falling already happening as they print money out of thin air. Bottom line inflation but with slow real growth if not negative growth and as such stagflation. Of course official CPI numbers especially in the US being played with to the tune of about 3% vs reality. Lets remove that from the CPI because it shouldn't be there. I did love the price of oil doubling and price to the consumer at the USA petrol pump doubling in 2006-2007 yet only 20% of the 100% rise made it to the CPI. 

What does this any of this possibly do to the linchpin of our index ? Banks ? Nothing good and a lot not being old enough cant remember the fiasco the late 1980's and early 1990's saw with out banks. Not suggesting we go there again as we saw GFC1 our prudential system via APRA and more so the RBA had our banks held in very good stead. That was then and this is NOW. Unemployment here did not spike, nor did interest rates GFC 1. 

Given the long term economic cycles and pressures at present the chances of us having unemployment rise 3% vs it fall the same amount are 100% . Basically we are at full employment at 5% unemployed. Chances of rates falling 3% for any length of time vs them rising 3% again about 100%. Only idiots lend money below the inflation rate ... Or below the risk of default and that's exactly what is happening right now.


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## kahuna1 (20 August 2013)

Just did something if anyone is interested,

its long and detailed and in the PDF.

About US debt bubble and history of the Dow and valuations since 1895. 


Take care

Mark M 

View attachment August 2013 Opinion.pdf


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## db94 (21 August 2013)

kahuna1 said:


> Just did something if anyone is interested,
> 
> its long and detailed and in the PDF.
> 
> ...





look forward to reading it


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## kahuna1 (23 August 2013)

Hi,


Just for those who read the original long post and enjoyed it. 

The US market due to these fiscal and monetary government actions being turned wide open has risen MORE than here in Australia. The UK has the fiscal side being turned down whilst monetary policy is still wide open and as such has performed between our own performance and the US. In the UK however this year their fiscal deficit is 131 billion pounds or 8.6% of GDP even MORE than the USA. Its monetary policy is open just as wide as the US with rates also at zero with inflation at 2% ish.

No prize for seeing the end results.

Off the low in 2009 the US from 6,547 in the DOW to 15,659 has risen 9,112 points or up over double and 139% of the low hit then.

In Australia the All Ord s hit 3090.80 in 2009 and hit a high of 5229.80 not so long ago. This rise was a mere 69.2% from the lows vs the US. We have not hit a new high and this is a direct result of both Fiscal and monetary policy being set much higher. Even with recent cuts in domestic rates the cash rate is 2.5% ABOVE us rates and in fact post GFC after easing we raised rates for some time. Monetary side government spending which many have been trying to whine about or spending has not gone over 5% of GDP deficit vs the US at 10.11% in 2009 and still 6% for this year … 7% for last year. In effect they have pushed and kept pushing and still keep pushing which has created this bubble yet again I talk about. The UK is running a fiscal deficit of OVER TWICE our own with obvious results.

In the UK I use the FTSE 250 or all shares index as the FTSE 100 is too concentrated in oil and financials, anyhow the FTSE 250 hit a high of 11,926.90 in May 2007 hit a low in November 2008 of 5491.3 and the recent high 15,231.90 is actually 177% higher than the lows. If anything in even more scary regions than the US. Part of this has to do with the concentration of Oil and Gas plays in that index especially in the top 100 stocks.

The UK running the largest fiscal hole around has risen even more than the US.

This to me is of a concern, as is the US.

Our own market is where it is because of government policies along with a view that commodity prices have somehow peaked or are in threat of going down. If say one looks at FMG profits on 80 million tons of production vs an expected 155 MT by end of 2014 and the 1.7 billion profit vs a market cap of 12 billion its well under 10 and its cost per ton are falling. A fall in the currency of late will only help things. With a debt overall of 12 billion it was interesting to read the papers and journalists criticise the paying out of 10 cents per share or 300 million in dividends. It still left 1.3 billion to pay down debt and as it would appear at least for now things are on track with both production targets and even the raw price of iron-ore one year at full production of 155 million tons should bring about 3.3 billion profits and even if they paid out another 10 cents per share or 300 million debt would go from 12 billion to 9 billion and if another year went on down to 6 billion. This said the perception is still there and it has hit our market with a more commodity based profile and the performance of Rio and BHP to me have been a vast disappointment over the last 5 years.

UK market with the more focus on oil and gas and oil back over $100- its has benefited in the opposite way to our own. This said the policy of the UK has been even more aggressive than the US to accommodate financial markets and with monetary policy set at zero and HIGHER yield rates for UK stocks vs US ones this makes them even more attractive and in effect an even bigger positive to the UK market direction along with government spending even more insane than the US the results speak for themselves.

The US barely broke the old high in 2007 for the Dow 15,658 the 2013 high vs the 2007 high of 14,164 or 10.5% higher than the old high, the UK FTSE pre GFC peaked at 12,282.2 vs a high of 15,231.90 or a whopping 24% above the old high.

The result of this is clear via examining government policies both fiscal and monetary.

When we look at 2007 we in hindsight know it for what it was a bubble. Same for the 2000 and same for each of the smaller but no less violent moves of the 1960-1985 period in particular the 1972 and 1980 regions.

As I went back 120 years with the paper and have gone back even further myself to booms and busts in the 1700 and 1800's the same sort of things occurs again and again.

With the Australian market here lagging all the others the impact of the correction I think if it comes will obviously be less, but this said the governments of UK and US and others have built a perception of market value based on hot air in the 2008-2013 period. As such I would proceed with caution. Since we are so very undervalued due to our own governments stance and sensible stance vs the other nations we have risen less. Like in the GFC we were in reality hit less on the obvious fronts of job loss and housing crashes and bank runs, so too this correction I suspect we will do far better.

I suppose the 2000 boom is the best to see what possibly may happen. The US DOW fell from peak to bottom 37.8%, but this is only 30 stocks and not that tech orientated the S+P 500 in the US fell more and the very tech orientated NASDAQ fell from a high of 5,132 in March 2000 to a low of 1,108 in October 2002 or a massive 78.4% . The less tech orientated UK index fell around 47% in the 2000 period having risen slower and less into 1998-2000, so the fall was much less !! Same happened with the all ords and ASX 200, the ASX 200 I think fell from a high of 3,506 to a low in March 2003 of 2,693.3 or a fall of just 23%.




Yes it goes ON ... not too far this time


Here is the PDF of it for light reading if interested.




Take care Mark M


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## CanOz (23 August 2013)

Another one in cash since 2009?

You can't fight it....

Let the price action tell you when to bail, ignore the fundamental stuff. The entire world is in debt....to who? The entire world?



No one cares about debt anymore...one day they're just gonna write off the whole 2222 bazillion and call it even among friends...

Give me a break, this isn't real...trade what you see.


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## Porper (24 August 2013)

CanOz said:


> Another one in cash since 2009?
> 
> You can't fight it....
> 
> ...




Seconded...this would be a good post to put in the Gold thread for the likes of Uncle to read. They've been bearish for years & keep predicting Armageddon. It isn't going to happen. Conspiracy theorists need to come into the real world.

There is a lot of money to be made in the markets at the moment, why would you be waiting for the world financial system to collapse?


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## kahuna1 (24 August 2013)

No, I was fully invested in 2009.

I usually post on another site. A Google will confirm this kahuna1. And actions.

It is an aside. In 2007 and in 2000 I exited markets only to re-buy when the hot air had been let out. A view shared in public in real time on forums.

Many thanks for your view that I have in some way missed the recent rise or panicked at the lows. 

Enjoy I suggest you go  get some leverage at these levels. Trying to prove an opinion or view before it eventuates is not possible. I have however shared views as mentioned for many years. If you Google Kanuna1 Uranium you may actually learn something about whom you just took a cheap shot at. The post that I see comes up from 2005. and read on. Cigar lake flooding took 8% off the table with obvious impacts to the price.

As for the economic side if you think I was fully invested at the peak in 2007, go to a chart, Google my name and read the relevant date.

I stopped bother positing for a long time for reasons like you just reminded me.

Take care


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## Gundini (24 August 2013)

kahuna1 said:


> I stopped bother positing for a long time for reasons like you just reminded me.
> 
> Take care




You are not alone here kahuna....

Many read these forums everyday like myself, in hope of gleaning some pearls of wisdom, but post rarely as some posters turn it into a personal challenge to beat down and discredit the contributor. It comes under the guise of "healthy and robust debate" and "off topic until I finish my personal lambasting"

Check out the Gold price, where is it heading thread, a classic example of a battle of egos. 

Sometimes I open the thread and say to myself, the lads are at it again, nothing new here, why did I bother.


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## CanOz (24 August 2013)

I personally apologize if i came across as rude...no excuse for that.:bad:

Good to have an alternate view, i actually downloaded it too so appreciate you posting the PDF.

Keep posting Kahuna, don't mind little ole me...


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## pixel (24 August 2013)

Keep posting, Mark

An Open Forum is full of different opinions. Some are expressed more politely than others. Some traders are taking a multi decade-long view, while others trade single tick swings by the minute. Very few try to apply both.

I fall into the latter camp: As an old fossil, I don't have enough time left to to worry about decades or generations to come. Therefore, I trade the way that suits me, offer my opinions as I see them, and can't be offended by disagreeing posts - no matter how politely or rudely expressed. If my opinion is opening just one pair of eyes, helpful to just one reader, I feel it's been worth posting.

Looking at people's reaction at _that other site_, I'm sure you agree that you have reached more than one


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## craft (24 August 2013)

CanOz said:


> I personally apologize if i came across as rude...no excuse for that.:bad:
> 
> Good to have an alternate view, i actually downloaded it too so appreciate you posting the PDF.
> 
> Keep posting Kahuna, don't mind little ole me...




CanOz

The apology is good but it would be better if you learnt a lesson.

You are meant to be a moderator FFS.  

The truth is that if a person doesn’t share the dominant group mentality on ASF you have to be very thick skinned to bother persevering and that results in lots of posts never being made.

Kahuna1  don’t let the noisy ‘geniuses’ ruin it for those that quietly ponder your points and I am sure appreciate your effort to convey your thoughts.


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## CanOz (24 August 2013)

craft said:


> CanOz
> 
> The apology is good but it would be better if you learnt a lesson.
> 
> ...




Fair comment Craft, however i am human and i do make mistakes. I'm happy to apologize when i realize my mistakes.

If you prefer i not be a moderator, please let Joe know and I'll resign.


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## kahuna1 (24 August 2013)

Thanks for the apology, not really needed.

Each of us does what they like with investments.

Whilst I post here not a lot, I have for many years in fact well over 15 years shared views on various chat sites.

I have been threatened by companies with legal action, in fact kicked of Hot copper for actually talking about some companies during the dot com era. One which i just loved to hate I look now its GONE and into a small mining thing but in 2003-4 it was one of the very few survivors, it had no income, no sales but a great PR company which included media identities all talking billions in revenue. They had a device which saved 50% in power. It was a great Fad in the bounce 2002-3.

What people didn't read is how it saved the power. Most amusing, it was turned off for 50% of the day during sunlight and that's how its saved.

Needless to say, it rallied 30 fold. It was being pushed on HC like you would not believe. Also by some owners of the site I suspect. Anyhow the share price in today's terms after all the splits went from 30 cents to $9.30. The actual price then may have been prior to all the splits and recaps from $0.05 to $1.50. Still made it no less silly.

So after this peak in today's terms of $9.30 where is it today ? .... 0.006 cents less than 1 cent.

Opinions are opinions and I made no friends during the Uranium peaks,  despite knowing the game and what it was I jumped on and went in and out but always knew it was a game that ended with the music stopping and it ending with 90% losses.

We shall see if I am correct being wary, or not.

Only time will tell

take care M


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## Trembling Hand (24 August 2013)

kahuna1 said:


> Opinions are opinions and I made no friends during the Uranium peaks,  despite knowing the game and what it was I jumped on and went in and out but always knew it was a game that ended with the music stopping and it ending with 90% losses.
> 
> We shall see if I am correct being wary, or not.
> 
> Only time will tell




Actually many go broke from jumping off too soon but its clear that there is some nasty losses and massive amount of wasted time from falling in love with an approach, idea, sector or company. For some reason people fall in love with the silliest of things. A stock ticker!!! 

A game it is. If the one you are on aint working it always stuns me why people choose not to jump onto one that is.


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## kahuna1 (8 November 2013)

Hi,

Well US and UK markets struggling up here. My view is based upon the US side and UK which are 30-40% higher than the ASX and the valuations there scare me as opposed to here.

That said, if the ASX 200 went another 5% higher it still would be in relative terms 25% below the US and further behind the UK.

Our policies both fiscal and monetary have us here. So too for the EU on the whole, tighter fiscal and monetary sides have them trading at similar value levels to Australia.

Any how have written a few things for anyone interested over last 6-8 weeks. Since my first one upset so many here are some more.

Just opinions and time will only tell.  

Bubble-mania 2013 is the first 




View attachment Bubblemania 2013.pdf


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## CanOz (8 November 2013)

Opinions are like ********s, everyone has one!



> Leading Indicators Point to Higher U.S. Stocks: Chart of the Day
> 2013-11-07 05:00:01.4 GMT
> 
> 
> ...


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## kahuna1 (8 November 2013)

Opinions are like ********s, everyone has one!

And you are a moderator ? 

You will not like the rest of what I will post here.

I at least in 2000 wasn't told I was an a)*&)*@& by the moderator

In 2007 when I  did the same on yet another site ... I wasn't told I was an *)$@*)&@$_

But 2013, the moderator knows best.

I have my opinion of you, you may have yours of me. I will however not respond in kind.

Once I was voted the biggest looser on a thread on another site, It was sad but amusing but the stock fell 99% and as suspected it was worthless.

In 2006-7 I actually got booed as the only presenter at an Uranium conference who was bearish and my own long term view of Uranium was a price 40% of the spot. It sadly went lower than my $50- per lb call.

Had the same each and every time for 15 years, at lows ... its going lower ... at highs its going higher. 

As an advisor to two of the largest funds in the country I got sat in the corner and thought of as some fruitcake in late 2007 because I was of the view equity markets fell 30% in 2008. When they fell 26% and recovered 19%, my own well publicized view was the conditions were even worse, and they fell 40% overall.

I was wrong, they fell over 50%. I was still sitting in the corner at two of the three funds I advised. The one who didn't make a big deal about it, followed their own course and mine was just a voice, an opinion, sold all banking stocks early 2008 into the GFC. They are of course one of the most successful fund managers of the last 10 years in Australia. I had nothing to do with this it was their doing not mine. I did however chew off the investment managers ear who also happens to share the same surname as the author of the piece you just derided. 

Had the same in 2000, same on the view the AUD at 60 cents went to 90 cents, then to $1.10-. I gave it for free, shared the view with others. 

Had the same in 2003/4/5/6 on oil view when it was $25- I thought it went to $60- then 80- then late 2007 as the US dollar fell out of bed it went to $150- was my view, I was wrong it only went to $144-. Up there I thought it halved and again an opinion shared and laughed at. I was wrong about it halving from the  high, it went I think to US$33-, before bouncing. 

I should be used to it I suppose. Not however from a moderator but nothing new.

My view is shared I might add about US and UK equities by quite a few. As you can see my surname it might be an idea to actually see if there is anyone with the same name running the most successful fund manager in the country over the last 10 years and get back to me. 

Take care


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## tech/a (8 November 2013)

kahuna1 said:


> Opinions are like ********s, everyone has one!
> 
> And you are a moderator ?
> 
> ...




Yeh as he said Opinions are like ********s, everyone has one!

YOURS is no different.
Nor is MINE.
You/I or He don't have to agree with any opinion expressed.


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## kahuna1 (8 November 2013)

I agree,

you don't have to agree.

Don't expect anyone to. Just expressing my own.

take care


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## tech/a (8 November 2013)

kahuna1 said:


> I agree,
> 
> you don't have to agree.
> 
> ...




Well that's YOUR opinion!


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## Joe Blow (8 November 2013)

kahuna1 said:


> I at least in 2000 wasn't told I was an a)*&)*@& by the moderator




kahuna, this is not what happened. 

CanOz made a very general remark, and then posted a contrasting article in response to your post, to demonstrate that there is a great diversity of views about where the market is heading. 

What he said was not aimed at you, nor anyone else in particular.


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## kahuna1 (8 November 2013)

Joe Blow said:


> kahuna, this is not what happened.
> 
> CanOz made a very general remark, and then posted a contrasting article in response to your post, to demonstrate that there is a great diversity of views about where the market is heading.
> 
> What he said was not aimed at you, nor anyone else in particular.




I know Joe,

No problemo. Congrats by the way !!

My view on the leading indicators.

Composite Index of Leading Indicators'
An index published monthly by the Conference Board used to predict the direction of the economy's movements in the months to come. The index is made up of 10 economic components, whose changes tend to precede changes in the overall economy. These 10 components include: 

1. the average weekly hours worked by manufacturing workers
2. the average number of initial applications for unemployment insurance
3. the amount of manufacturers' new orders for consumer goods and materials
4. the speed of delivery of new merchandise to vendors from suppliers
5. the amount of new orders for capital goods unrelated to defense
6. the amount of new building permits for residential buildings
7. the S&P 500 stock index
8. the inflation-adjusted monetary supply (M2)
9. the spread between long and short interest rates
10. consumer sentiment 

Its nice to present a chart, but above is  what it represents.

So to impose a chart which has a component of the S+P 500 in it against the current market to predict its future direction to me at least seems somewhat silly, but this is an opinion.  7. the S&P 500 stock index

As I am sure you are aware the US participation rate has fallen 3.2% in recent years. In the EU theirs has fallen 1% off its peak. Australia has barely moved. If you equate back 3.2% of 65% of people over the age of 15 in the workforce being doctored and taken off an index the fall in the US Unemployment rate if it used the 1% the whole of the EU has used is overstating their unemployment by over 3%. The reported 7% ish unemployment rate is if reported the same way as the EU likely over 10%. Makes measures one and two pretty useless.  1. the average weekly hours worked by manufacturing workers  2. the average number of initial applications for unemployment insurance

In the USA as I am also sure your aware, the weekly unemployment benefits STOP after 26 weeks in MOST US states so if you have been unemployed longer than that, you disappear from the radar totally. This is reflected of course in the massive fall in the participation rate and those marginally attached to the workforce. Again makes measures one and two useless.

Number 8 the inflation adjusted money supply as I am sure all have heard of QE and the US fed entering the market and now has a balance sheet of 3.8 trillion, this has a massive effect on money supply, it is expanding money supply in the extreme. I am unsure whether this has BEEN removed from this leading indicators but I suspect NOT as there seems to be a pause in the chart exactly when the US fed stopped and then started again with QE2/3/4. So this takes the total to 4 out of 10 indicators on this precious chart.8. the inflation-adjusted monetary supply (M2)

As I am also sure you are aware US manufacturing jobs lost between 2000 and January 2009 was over 6 million jobs lost. This is from the US BLS or Bureau of Labor Statistics. As I am also sure your aware that since 2009 despite over 6 million new jobs announced, the number of US working are about the same as they were in 2008 in 2013. In other words no real jobs have been created.  As I am also sure your aware in 2009 US manufacturing according to BLS lost over 1.5 million jobs. Since 2009 in total there have been 500,000- manufacturing jobs added. In total I make the loss of jobs in this sector at over 7 million or 33% of the WHOLE sector. I question the use of the leading indicators as a tool when number 1,3,4,5 measures DONT show an industry which has lost 33% of the workers in it in 13 years as being a valid measure of anything.

So out of the 10 arguments about leading indicators used I question, as an opinion, 1,2,3,4,5,7 and 8. Which to me makes the measure 70% useless as is consumer sentiment. 

As to spreads between long rates and short rates, as I am sure you are aware the QE action via the US fed in buying 3 trillion more assets, bonds and MBS is actually targeted at this spread.

So this makes  the number 9 a useless measure totally when the government is buying long bonds to deliberately lower this spread.  9. the spread between long and short interest rates

I will not go on, that makes it 8 out of 10 things that make up the Composite Of Leading Indicators in my view, an opinion, but I think one can see as having some validity, making the use of this measure on market direction in 2013 not much use. It may have had some correlation pre 2007 as the US fed was NOT in the Bond market buying MBS securities, not inflating the money supply and pre 2007 there was no massive adjustments to participation rate and other measures. 

Just an opinion.

Thanks


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## CanOz (8 November 2013)

Gosh, seems I've unintentionally upset the apple cart here. Trust me, my remark about opinions were meant to highlight the article authors differing opinion. In fact the only reason i even placed it here was i thought it would be of interest to Kahuna. 

Obviously my choice of words inflamed an old wound that i had previously been responsible for. Sorry for that, sincerely. 

Kahuna, trust me it was not my intent to cause any hard feelings by posting the article. 

It was only meant to highlight the difference of opinion regarding this frothy market.

Only time will tell when this QE pumped up asset bubble will finally pop...until then don't get caught shorting it too soon.


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## kahuna1 (8 November 2013)

CanOz said:


> Gosh, seems I've unintentionally upset the apple cart here. Trust me, my remark about opinions were meant to highlight the article authors differing opinion. In fact the only reason i even placed it here was i thought it would be of interest to Kahuna.
> 
> Obviously my choice of words inflamed an old wound that i had previously been responsible for. Sorry for that, sincerely.
> 
> ...





No worries ,

I do actually know the full quote and have used it myself.

Opinions are opinions ... mine is as valid as yours.  I don't obviously like leading indicators as  a measure and found the Bloomberg view using a chart with this as, well typical for the site.

Again an opinion.

I will just leave it and post some other opinions, and accept its possibly and probably the wrong venue for them.


here is the original thing again and have a few to follow over the coming weeks

View attachment Bubblemania 2013.pdf


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## CanOz (8 November 2013)

You know, when i read that article morning (on his mailing list), i thought to myself "another muppet spruiking the case for a bull market"...ho hum...

If anything, the more they do this the more contrary i feel...


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## kahuna1 (9 November 2013)

Hi,

This may be difficult to grasp.

I have about 4 other PDF things I have written and it's NOT an opinion vs factual what I am conveying. The US economic numbers coming out over recent years have varied so greatly from numbers presented in other countries that they have become useless as a measure of anything.

On the US employment side. The participation rate peaked at 66.4% in 2007 in 2013 it hit a low of 63.2%. Participation rate as defined by the USA and most other nations is the percentage of people over the age of 16 in the workforce. 

In the EU for example this participation rate moved down by about 1% from 2007 to 2013. That is during periods of full employment more people join the workforce as there is more work vs a recession. As we all know the EU has an unemployment rate of 11%. Its participation rate moved 1% from peak to low. This basically as it's a percentage of the 63% in the workforces has a direct impact of MORE on the unemployment rate. It actually moves it by 1.5%.

So looking at every other nation pre GFC to POST GFC and the participation rate Canada I found barely moved, Australia Barely moved, of the EU nations the average was 1% and yes there were some that moved close to 2% and others which moved close to nothings from 2007-2013.

So prior to last night I was and had observed the USA had reported 6.5 million jobs but in reality NO NEW jobs had been created since 2008. NONE. The participation rate in the USA had been moved from 66.4% down to 63.2% which was 3.2% which was well outside the scope of any other nation on the planet.

The headline unemployment rate had peaked and gone down and down, and all these jobs were announced, but the reality is the same number of people were employed in 2008 vs 2013. In the meantime the population had gone up over 11 million, and as strange as it sounds the fact is LESS are employed in 2013 despite this growth in population than were in 2008.

A common and well know phrase is 'Lies and damm statistics'.

The fall in the participation rate of 3.2% from 2007-2013 actually MADE the US non farm payrolls and unemployment number move DOWN 4.9%. These numbers are factual, not an opinion. So too is much of what I attempt to convey. The latest release is here on this link.

http://www.bls.gov/

Prior to last night I commented if the US had just moved its participation rate the same as the EU down 1% instead of 3.2% this at 65% participation of the workforce would have had US unemployment 3.4% HIGHER than the current level and at 11.6% which is in fact HIGHER than the EU.

Last night the market rallied, it rallied because 200,000- jobs were created according to the Non farm payrolls. 
WRONG. Not an opinion but factual.

On the latest release, page 2,  The labor force participation rate fell by 0.4 percentage point to 62.8 percent over the month.

To equate this to numbers of people, with a workforce of 155.5 million, if you go to page 12 of the PDF release, the NOT seasonally adjusted numbers but raw ones, a fall of 0.4% hit the number of those in the workforce by 600,000-. Seasonally adjusted this Number is 720,000- the difference between 155,559- and 154,839-. Basically 720,000- people disappeared from the workforce in one month. Of course some of  this had to do with the government shutdown. 

The number of those still effected by the government shutdown and counted in the numbers, those who were on leave is in table 11A on page 23 pf the PDF and it is adjusted, the number of those temporarily on layoff rose by 450,000- .

So the reported GAIN in employment was the difference of the two, the total workforce falling 720,000- and the fact it was upset by the government shutdown by 450,000- so the net is 270,000- jobs gained. There were adjustments minor ones all over the place to this number to bring it down to the reported 204,000- jobs gained. 

Of course it's not really jobs gained, not a single job was gained.

NONE in fact, the workforce fell.

Those NOT in the workforce on page 12 went up 820,000-.

The collection of this report was delayed so as most Government workers and impacts were not  included in it. This is factual because if BLS employee's like other government workers were laid off they could not have counted other government workers NOT working because they were having an unpaid holiday.  

The civilian non-institutional population consists of persons 16 years of age and older residing in the 50 States and the District of Columbia who are not inmates of institutions (for example, penal and mental facilities and homes for the aged) and who are not on active duty in the Armed Forces. California is the most populous State, with about 29.3 million persons in this category in 2012; Wyoming is the least populous State, with approximately 445,000 persons. 

It remains to be seen what happens to the participation rate in next months BLS non farm payroll report. Does it get readjusted back up as the Government crisis is over ? Or does it magically sit at 62.8% and another 700,000- people in the US disappear from the number and join the 15 million increase in those NOT in the labour force from 2007 to 2013. The number as of this report is 91.463 million not in the labour force in the USA. 

In October 2008 there were 145.5 million employed in the USA. P 10 of PDF
In October 2013 there were 144.1 million employed in the USA  P 12 of PDF

In October 2008 there were 79.6 million people NOT in the labour force
In October 2013 there were 91.4 million people NOT in the labour force

I am painfully aware the equity market is reacting to a positive non farm payroll number. The fact that between 200,000- and 300,000- people were permanently removed from the workforce vs a month prior to this is not good. The market reacting to an addition of 204,000- jobs to the workforce when it appears the number was like most since 2009 the opposite of what is being reported.

Of the 850,000- government workers put off the Pentagon had 400,000- put back on very quickly and this is reflected in the increase in those on temporary leave which increased by this amount.

The litmus test will be next months numbers and I suspect they slipped this massive fall in the participation rate in bringing the total to 66.4 minus 62.8 or 3.8% which basically equates to 5.8% being adjusted off the workforce. If one used the EU number of 1% this would be a difference of 4.3% the method used in the USA vs virtually every country on the planet. USA reported unemployment would be 11.6% vs 7.3%. 

It is possible, next month, this fall in participation rate remains as they slipped it in whilst others were not watching and the actual headline unemployment rate could fall even further when no one in fact has a new job. If you have 11.8 million people MORE not attached or in the workforce over the space of 4 years and you have 4 million MORE working part-time, that’s over 10% of the actual workforce.

Economics is called a science, but it is in fact a social science. Psychology is called a social science. Astrology is a social science !! 

Whilst economics used correctly has many virtues, a theory in economics is not a theory in any other of the sciences. A theory in physics is backed up be experiment and testing and factual data. If a real scientist talks to you about a theory it is factually backed, a theory in modern economics is what it is, likely not related to any facts. 

Economics and statistics in 2013 and the versions being presented via statistical buggery to me have as much meaning as astrology. Until you examine the facts, strip out the mutations and perversions, you are totally unable to arrive at a number you can compare apples with apples. If 720,000- people permanently left the US workforce in October 2013  to join the over 10 million in 4 years who already are there, it is quite a sad number. To report 200,000- have gained jobs when 720,000- more are not in the labour force, and then react to it as though it's a positive is stunning. 

Next month they could if they keep this low participation rate and shave a bit more report a fall in unemployment and the headline rate falls to 7% or below. This I do understand the supposed reasoning behind it and this is confidence, it may boost confidence and actually create jobs by giving the illusion of jobs been created. This is the objective, but after 4 years of this style of reporting and 11.8 million more people not counted in the workforce and reporting a falling unemployment rate from up near 10% to today’s 7.3% clearly have NOT created a single job, why would one expect this to change ? 

An opinion but here are the PDF releases if your interested. Must run and go read my stars in the astrology section of the newspaper.

Take care 


View attachment BLS Non farm Oct 2013.pdf

	

		
			
		

		
	
 the Current ONE October 2013


View attachment BLS non farm payroll  Oct 2009 empsit_11062009.pdf

	

		
			
		

		
	
 Oct 2009 report to look at 2008 October numbers


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## kahuna1 (10 November 2013)

Hi,

I just thought I would back up this fact. 

US reported 204,000 jobs gained in non farm payrolls when factually 720,000- LEFT the workforce. So in reality the US Job Sector LOST 200,000- to 270,000- jobs, it did not  GAIN 204,000 and the market reacted to a gain which was a loss.

All this was done via buggering with the numbers in the workforce via participation rates.

THE USA in this regard is OUT OF CONTROL in reporting and has been for some time.
I have the EU participation rates done slightly different for those between ages of 20 and 64.

I used the EU core members for the unemployment rate I quoted at 11% NOT the whole lot of them which would make unemployment 12.2% on the whole.

This buggery by USA in its statistics moving the participation rate from 66.4% to now 62.8% has shaved over 5.5% off the headline USA unemployment rate when NO new jobs have been created.

A total crock of _(*&(_&@

Looking at EU participation rates, in the main 20-64 range.

UK moved down by 1% from 2007 to 2013.
France has moved down by 1.1% from 2007 to 2013
Germany has actually moved UP by 3.8% up NOT DOWN 

France just had its credit rating dropped by Standard and Poors. Reason given was high unemployment and the fact it was seen to not recovering till 2016.

I would suggest France adopt the US policy and just lie, if one puts the whole release into context S+P said it was worried about Frances net debt to GDP of a peak in 2015 of 86% of GDP.

Now if France with unemployment at over 11% had done what the USA is doing and lowered the participation rate in the workforce by 3.6% NOT 1.1% like they did which is a more accurate picture of the real situation, the French unemployment rate would NOT BE 11% it would be 3.85% LOWER than they quoted and 7.15% which is LOWER than the USA.

As to debt, the USA total debt is actually on the federal side 17.137 trillion USD. Total GDP is 16 trillion and the Debt ratio is 107.1%.
http://www.usdebtclock.org/

I expect this number to be 17.6 trillion by February 2014 when the US debt negotiations come around and that is 110% of GDP.

France reports the actual debt warts and all. In many cases the US side the assets held in government pension plans and social security are counted against its debt. The liability owed IS NOT shown anywhere in budgeting and in the case of Government employee’s pensions in the USA it has a funding shortfall of just over 10 trillion so counting the 3 trillion in the bank against obligations of 13 trillion is absurd and no EU nation is allowed to do this. Same with US social Security and it also is broke with a shortfall of 20.3 trillion so counting an asset without counting a liability is against every accounting rule known to man.

I just wanted to again highlight the absurdity of these credit rating agencies.

The fact that yet again the USA is messing with realities, the markets perceptions of them and if the USA used EU methods of reporting for Unemployment its unemployment rate would be over 11%.

As to Government debt same thing.

In the end it will not matter as the whole issue I believe will be taken out of their hands.

The following PDF is about China and about currency issues and actual credit ratings going forward. Whilst factually backed, predicting the future is even at the best of times difficult. One policy move will affect the course of another.

Bottom line, I suspect China will downgrade US debt two or more credit levels in the next 12 months in response to its out of control debt and reporting.

If France is downgraded from AAA to AA plus and now AA, reasons given a high unemployment rate and debt to GDP ratio that in 2015 will reach 86% of GDP.

I ask why no action on the USA with an adjusted look at REAL unemployment has a similar rate to France at 11%, 12 million people did not choose to leave the workforce in the USA the last few years and 800,000 alone did not leave last month.

Debt side, the USA is at 107% of GDP now. The government Federal side takes in HALF the tax the French do. HALF. USA in 2015 I suspect is 116% of GDP and by 2016 it hits 123% of GDP.

As much as it is an unpopular opinion and the USA will call the Chinese a threat to national security for what they are going to do, lower USA credit rating to a junk level, I do believe there is serious cause for this to happen.

Anyhow this is another PDF with a few views and possible outcomes.

Cheers

Mark


CHINA SYNDROME 

View attachment China Syndrome Oct 2013.pdf
View attachment China Syndrome Oct 2013.pdf


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## kahuna1 (11 November 2013)

“Men occasionally stumble over the truth, but most of them pick themselves up and hurry off as if nothing had happened.”
Winston Churchill 

I have commented on public sites for now 15 years, offering views, opinions based upon fact.

In 2000 the day I heard two respected US market commentators early March and the US NASDAQ had hit 5,000- for the first time and both were talking about how long it took to hit 10,000- I knew its days were numbered. For some time the rally had defied comprehension for someone who was fundamentally based, being told the new way to value stocks was not off profits but off sales, was to me idiot. It however did not last long this foolish view. The NASDAQ actually doubled in the last year and 1999-2003 and whilst it did go a few % higher, after seeing and hearing this, like so many times in the past the end was near.

In 2012 as one of the people who I watched with morbid fascination debate the NASDAQ going to 10,000- just having passed 5,000- and she telling the 2012 commentator she in fact was bearish the NASDAQ correction, I was astounded by this, because she was NOT bearish and in fact over the 4,000 stocks on the NASDAQ at the time in March 2000 there were how many sells from all the brokers on Wall St ? There were 7 single sells.
History of course now can tell us the correction and the fall of 75% on average of all stocks on that index.

In 2007 watching as I do economic indicators and other things people rarely watch, the bubble in housing was clear to see. What actually tipped the whole scale for me is late 2007 the USA announced a GPD increase of 5.3%. What makes up a GDP number is a deflator which removes inflation from the equation and makes it a REAL after inflation number. In this release late 2007, the CPI had been released a week prior to this and it was 2.8%. I had severe problems with the CPI as it was understating inflation in 2007 in the USA by about half late 2007. Petrol prices in the USA were up 34% to the consumer at the bowser but the CPI had a mere 8% of it showing. House prices had gone nuts, but the largest CPI component had it ALL removed. Hence I thought the CPI was a lot higher than the reported 2.8%. 

What tipped the scales for me in 2007  was when I looked and examined the reported GPD number and looked for the inflation number they used, the deflator I found instead of using 2.8% or a number higher, the BEA the US Bureau Of Economic Activity used a number of 0.8%, deflator which as its a negative on GDP if you use a smaller number it overstates the GDP size. In 2007 as has always been the case the BLS measures the CPI in the USA and the GDP is measured by the BEA. Prior to 2000 for 50 years there was over that period of time nearly a zero difference between the two measures of inflation, in 2007, there was a 2% difference and worse than that, the CPI itself was clearly showing NONE of the doubling of house prices 2000-2007 in 9 different cities in the USA and it was showing less than 20% of the increase in the oil price from $25- to $80- at that point in time.

This coupled with an already crumbling credit market, a housing market in extreme trouble and an economy being reported as growing strongly, but likely barely marking time after inflation, the equity side at all time highs was clearly incorrect.
About lying, eventually if you tell so many lies you loose some grip on reality, what is true, what isn't and if your cant see or hide the problem until its too late, it ends badly.

What they did during the GFC from banning shorts, to proclaiming early 2008 it was all over and all was ok actually I suspect made the problem worse rather than better. An opinion but, once you go down the slippery slope of lying, people will be less willing to believe you when your even telling the truth.

Strange things for me, as a market person since 1982, people used to end up in jail for the types of activities that went on and led to the GFC. In the early 1990's USA had another crisis which was the first of the housing led GFC's and the S+L crisis is what it was called. Similar lending practices and I believe 1,100- people were charged and went to jail over what happened then. In 2007-2010 I am not sure a single person went to jail other than a few who were running ponzi scheme's.  None of the writers, or sellers or insurers of the Mortgages or backed securities went anywhere near jail. Citibank almost destroyed, their CEO got a $50- million payout as he left.

It is all about risk, respecting risk and in the post 2000 era being able to identify risk and reality from what is presented to you.
Post 2000, humans are no longer in control of trading, most is done by idiot savant trading computers which trade faster and faster and faster and learn from direction and spot trends and follow them with little or no reference to anything other than the direction of that trend. 
“There is no truth. There is only perception.”
Gustave Flaubert 

I wouldn't and don’t agree with this. There is fact which is close to the truth and then there is perception.

In 2000, people were not that worried about stocks on an index going up 100% in a year and were talking about it doubling again. The conclusion of these idiot analysts was it would take 2 years for it to go from 5,000- the NASDAQ to 10,000-. It is not their fault. It is in fact their role.

In 2007, we are now told by the NEW US Fed Chief she missed the housing crisis. She lived in San Fran, Janet Yellen and he husband a winner of a Nobel prize in economics which is a social science as opposed to a real science. A theory in Science such as physics is backed up by facts and many facts and experiments which prove this theory. In economics a theory in 2013 is a hunch or even a hope. Even when clearly the QE1/2/3/4 has not created a single job, rather than admit defeat the participation rate is altered in effect taking 5% OFF the unemployment number so the reported 7.2% unemployment is in reality well over 11% if EU methods are used. 

Again this is the US Federal reserves role as well as any government.

The role of the analysts talking about the NASDAQ is in reality to sell stocks. They are paid by the investment banks for selling stocks and promoting stocks so they will always have a bias on the upside. ALWAYS. If your an analyst and come out with a sell on a stock and your company is trying to do a debt issue or share placement, the company if you put a sell on it would go to another investment bank which would put a BUY on the stock even knowing it was worthless to get the 100 million fee. This is a fact of life. Even an honest analyst and there are some out there, they don’t last, for the simple fact that if your put a sell on a company, they are less inclined to speak to you, take your calls or invite you to briefings. This does not forgive of course the analyst trying to rewrite history but its an aside. Talking about 10,000 when it fell to 1,250- is factual and reality. 

Part of the mess with the current credit rating system and whole overblown asset bubble in 2007and in 2013 comes from this. A ratings agency such as Moody s, or S+P earns its income from being paid by investment banks and banks to put a credit rating on assets and debt. It bundles sometimes worthless ones, gets an insurer who cant possibly repay if it goes bust to guarantee it for a fraction of the real risk and then sells it to the debt market.  For the credit rating agency the person doing the work is a lowly paid analyst who dreams of an entry-level job at an investment bank where they will be paid 2-3 times their current salary. The credit rating agency itself it its too harsh and doesn't apply the better credit rating for the paper or bond the investment bank is trying to sell, next time they may go to someone else, they may even NOT pay the credit rating agency when they find the credit rating applied is going to be too low. Its all about money, motivations and when you pay 1% more for every 3 big steps in credit ratings, if you can buy assets at one level, package them and sell them as sweet-smelling bonds with an insurance policy and they have an average life of 20 years, the 1% difference equates to 20% in price. If you sell 100 million this way the profits are huge. 

In the end, perception is altered. The underlying risk is little changed by any action they undertake. What is changed is the value. The RISK is still the same and examining the RISK v the Value you still come up with the same outcome. What of course is changed is the PRICE they are sold at. They are sold as sweet-smelling bonds when in reality they are still steaming piles of doo doo.

Government sand central banks, their role in the market has been from the same standpoint for over 100 years if not always. The government is there to protect its citizens and their interests first and foremost. Central banks have similar objectives but mainly they are for decent GDP growth and stable prices. That is low inflation with full growth. Added to this of late the US Federal reserve has had the mantra of stable financial markets. 

So in 2013, like in 2007, I have highlighted the fact the last release by the US government about 204,000- jobs being added tot he market is a fiction. In fact 820,000- were added to NO LONGER attached to the workforce and the participation rate fell by 0.4% which I believe is the largest move ever. Of course some of this had to do with the government shut-down but removing the 450,000- from that the REAL number is it appears 270,000- people LOST their jobs or disappeared from the workforce not anyone gaining jobs.

If the USA used the same methods as France just downgraded for this reason its unemployment rate would be 11.2% NOT the reported 7.2%. Its debt would be now 107% of GDP v Frances 86% in 2015, by 2015 I believe USA will have a Federal debt of 116% of GDP v France at 86%. In other words 30% higher.

I highlighted this anomaly in the PDF previous post named the China Syndrome.

Its not a conspiracy theory it is just how things work. How markets work, how government work and it still does not change the course of markets longer term.

In 1932 when FDR was going for re-election his campaign was run on the song “Happy Days are Here Again”. In 1932 the market eventually hit a low of 44 on the DOW v a high of 380. Unemployment had not hit its low and did so in late 1933 at an estimated 24% unemployed so a lot worse than 2007 even using real numbers. It does no one any good reporting the grim facts sometimes and I do understand this.

My dilemma is in 2013 is that humans have little input into trading decisions any-more. The computer driven systems rule the roost. The systems that too a 40 billion dollar company with shares trading at $37- and 10 minutes latter it was trading at $1- and then 30 minutes latter at $35-. No announcement came out, no customers were lost, nothing had changed. 
Several people have won noble prizes for efficient market theory and arguing that the market will always reflect all know information and is efficient. I say total BS to this and I would invite you to look at the richest persons list and see who is there. One thing almost without FAIL these people know is not the price of something, any dummy knows the price. They in fact know the value of things.

Buffett at the top of the list, as always, has made his life about this. A long list of M+A experts who buy things, but buy things knowing the VALUE of those items and buy them for $100- and sell them for $200-.  

Knowing the US reported 204,000- jobs created, but likely 270,000- were lost is a thing of value. Knowing if the US reported like any EU nation its debt and fiscal outlook and real employment numbers I suspect they would not be chasing equities higher. The game would unravel.

Perception and creating an alternate reality is nice. Sadly eventually reality bites and the gap between fantasy and reality is larger than  it was in 2007. The eventual outcome will be the same. On is factual, one is fiction. Price is being driven by perception and reality is factual. Economics in itself is a useful tool. Applying strict valuation techniques to reported statistics allows you to compare where reality is. It is not me being mean to the USA or any other nation that chooses to delude themselves, it is merely using the same techniques to report these numbers the USA produces and use the same methods on the EU or UK or Australia.

This is the last of the big papers I did of late on this topic. It may be out there but sadly eventually reality hits. Demographics is what is going to drive the fiscal hole looking forward in the USA more than anything. US trade balance and US debt issues secondary. China and its currency overvalued by 50% third. Eventually these bubbles will either explode or be let down. The only way for the USA to let this bubble down on debt is to tax more and tax I believe 100%more than where they are. Unlikely if not impossible. Draconian cuts to benefits. The trade issue and China with 3 trillion in USD and Japan with similar amounts supporting a currency whilst feeding the USA imports at a overinflated value for the US dollar has been going on for a very long time. I suspect it ends, not with steam being let out of one of 6 or 7 bubbles but with them bursting.

In 2013, with even more computer driven trading going on, little if any real analysis of actual numbers going on and people, humans going, that number is BS, like in 2007 the two trains are on the single track and one driver is saying to the other, I think the other one will swerve !! 

Time will tell, the computer systems following the trends will continue, until they don’t. The factually based look at the real picture will be clouded via illusion and altering peoples perceptions. Here is the last one.

Cheers Mark M


US DEBT CLOCK IS BROKEN 

View attachment US DEBT CLOCK IS BROKEN October 15th 2013.pdf


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## trainspotter (11 November 2013)

Seeing how 2,468,435 people die in the USA every year I am not surprised 720,000 did not turn up for work Monday 

Death and taxes and the USA debt clock are the only things certain in life.


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## kahuna1 (12 November 2013)

“Small is the number of people who see with their eyes and think with their minds” 
― Albert Einstein 

Hi,
Well its funny, its sad, it's as always interesting. I watched yesterday for the news media and their views about the non farm payrolls. Thinking just one might have mentioned that the BLS moved the participation rate down by a record amount and in fact 270,000- jobs were lost, not 204,000- created. But not a single peep.

It was with a  weird fascination knowing something missed by most and the market does the opposite. Comment after comment was about fears of the US fed tapering being withdrawn due to the STRONG Non Farm Payrolls and here I was sitting having to check a news release to see if they had actually read the same thing I had.

I checked and they did, it is however as with most things something in plain sight that is missed by many if not most.

So where to from here ? I am totally out of US and UK. That said it of course will decided where it wants to go. There are in the US markets 5 technical levels very close I have been so fond of using over the years, usually they stop there and in the S+P 500 the next one is 1799-1810 on the top. In fact there is one here 1770, another at 1780 and  then 3 up to 1810. These technical barriers have usually given markets pause but I am clearly as usual operating on a different set of fact than the market.

The Non Farm Payroll and the falling participation rate and 820,000- people leaving the workforce is factual. I have the release, I have the numbers. So when the idiot media is debating will the US fed stop its QE program due to strong numbers I am going “What Strong Numbers ?” . Are they blind ? Or just stupid. I tend to tune out the general media as it's just noise and a distraction, but one has to listen with an open mind and balance the two.

Basically one has to open oneself to reality and accept it. It doesn't mean the facts are changed but if the market is reacting to one set of perceptions which are NOT reality you can't fight them no matter how silly or stupid they may be.

After these technical tops on the US S+P up to 1,810 the next ones I have are 1,930-40 which is another 6% higher than them. Frankly I can't see the first set being breached at 1,810, but I can't rule it out. In 2008 as I watched with a morbid fascination after the market quickly fell 26% and I briefly went long as the US pulled out all stops the market bounced like a super-ball. I booked on individual shares around 25% in 2 weeks early 2008, I took the money and ran. The market did go higher on that bounce but not a lot. As the underlying news got worse and worse and worse the market and media and officials fed the market an unending stream of positive news I was horrified as facts came out. Institution after institution came out with shocking write-downs and others, with exactly the same assets declared they had been untouched. Of course they were in the same boat, it just took a little time and as those in distress forced to sell exited, those who chose to NOT be factual had to tell the full extent of the problem.

This phoney war lasted for a few months in 2008, as Fed Officials and MR Paulson whom I named a Baboon and every person with a pulse came out telling investors it was all OK and the market was 7% down from an all time high, the real losses kept mounting with 500 billion reported, likely 1 trillion then 1.5 trillion and the market on an unending stream of hot air rose and then didn't stop until it smelt the methane.

Different in 2013, no one is worried about anything. Then again in 2008 what made the correction scary was for me was the lack of fear seen in the USA and it was NTO until 2009 they got there. In Australia we saw very close to the low late 2008 as commodity prices crashed and BHP hit $50- early that year and $20- late that year. 
I am unsure what will effect the US and their Prozac Market. Its happy happy happy buy buy buy. US debt at 107% of GDP, no problem. Real Non Farm payrolls and unemplolyment at 11% not 7.2% as reported, not a worry. 

There normally is a catalyst for these corrections and it's not going to be the US Fed turning off the QE. It cant admit its wrong, it has not created a single job. If it did it would be facing a reality and reality is a place the US Federal side cannot go.
I do believe the catalyst will be outside forces, outside the USA demanding change. If I was French I would be demanding change after being downgraded by a ratings agency from the USA when their debt to GDP ratio is 30% lower than the USA and they were downgraded 2 levels below USA.

My view and opinion is that China forces the hand and demands change. It is possible that the US itself has a look at this fiscal hole but its unlikely. It's a hole that’s been built by 30 years of politics and the person who confronts it will be blamed for ALL of the mess if they reveal it. Demographics are factual. Whilst a modeling of how many will be over the age of 65 is a model, there are countries with older populations who the model has been proven to be exact on, so it's NOT like the stupid global warming. Japan has the problem of the aged the USA will have. Germany is currently hitting the increases of the over 65 well prior to the USA. These are facts. That the USA has removed 50% of those likely to be over 65 from budget numbers will be a problem according to politicians for those in power in 2020. By then, it will have exploded.
Anyhow, shared my view. Australia has far more room to move up if it chooses. Its 30% below the US levels and if it added another 5% between here and early next year there wouldn't be too much of a concern other than if the USA did correct we would follow more closely than prior to that. 

Nothing more to share. Opinions based upon fact and theories reached from them again based scientifically on them. Predicting the future is  virtually impossible. One thing changes it changes the outcome of another thing and that changes the outcome of other things. 
I would like to think the barriers on the S+P 500 at 1799-1810 stop the US side because the next ones are not until 1940. I cant see the second but after actually listening to the debate in the media and not one word about the non farm payrolls other than how strong the numbers were, it left me, well stunned.
Like other times into extremities I seem to be operating in a delusional world of my own. I can't stop the freight train which is buy buy buy on the US side. I am well aware being a contrarian in the face of a rally is a waste of time and money. Its a matter of does it stop here ? A question only time can tell.

Take care Mark

Here is my View on the US Feds Actions in PDF form on QE. I do not believe they will stop until forced is my view 
now.

View attachment US FED TULIP BUYING PROGRAM Oct 2013.pdf


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## kahuna1 (13 November 2013)

"Kindness is a language which the dumb can speak, the deaf can understand." 
-- C.N. Bovee 

It is two issues which are changing the US participation rate and one is how they measure if you unemployed the other is the demographic issue of people getting older and over the age of 65.

The first, after 6 months in 46 out of 50 states you drop off the radar after getting 6 months of unemployment benefits. You stop being paid and you stop being counted.

Second is as we all get older, the less as* a percentage we work. Those aged 55-65 only work 52%* v a 63% of the total 16-100 who work. Those aged 65 and over work 23% v 63%. As more go over age 65 this will bring about a natural decline in the overall percentage of people working over the age of 16.

I am being nice and very fair saying it is possible the 3.6% change in the participation rate part of this is due to more being over the age of 65 and this effecting it. On examination of the above and the BLS numbers themselves around 1.5% more are over the age of 65 v 2008 at most and if 2/3 of them are not in the workforce this is where the decrease of a maximum of possibly 1% in the participation rate came from. As they actually have numbers for those aged 65-70 working and its 39% v those in the 52-65 age range at 52%, even if at a maximum 1.5% of people did go over the age of 65, and those working 55-65 is 52% and those aged 65-69 is 39%, the actual impact on the whole of the participation rate of 1.5% of the workforce falling in participation rate by 13% is what it is .... less than 0.25%.

That said the 3.6% fall in the participation rate can be almost totally put in this statistical pile of buggery the US calls facts.
When you lose your job, can't get a new one within 6 months, your unemployment benefits stop, and you're not counted.

For me, and I suspect many this is a sad fact and I kiss the ground for where we live. Australia may have things we all love and are very proud of and things we deride in politicians, but like the UK the EU, after 6 months we are not added to the heap. 
Having lived there for so long, it was always saddening to see the homeless and in some places in great numbers. I now understand how, and why. If you are sick, we do not abandon you. I watched and read after cities and counties went broke recently and one of the first things when they went bankrupt which was slashed were the pensions. You work for the city, or the state and work for 30 years, contribute to your retirement not only directly from your salary, but via the fact you have a lower paying job than the private sector. The first thing cut when these counties and cities went bankrupt was the pensions. I now thinking about it have seen this happen time and time again, even with companies they under-fund their pensions or raid them in times of trouble and the worker is left holding the bag. The low paid voiceless worker.

Yes the same happens here in Australia but if it happens it happens on a very small-scale and there is a safety net to catch those. The net is removed in the USA. My issue whilst I have been talking about budgets, and number sand fiscal outlooks is about this very issue.

Social Security in which 6.2% of your pay* is taken out and your employer puts in 6.2% of your salary and you do so all your working life is one of these massive holes in the US budget. It pays like our pensions a retirement income for when you are over age 65. You can still draw on it at age 62. The drawing age is going to be raised to 67 for 100% payments in 2022-23. But it will be the sole income that over 60% of Americans will rely upon in retirement. SOLE income. Social Security is broke and how broke is my dilemma but one which will change the course of over 50 million people. Social Security can be saved and it will be. 

I heard Alan Greenspan who created a lot of this mess recently in 2013 call social security a welfare. It is and it isn't when you contribute 6.2% and your employer contributes 6.2% of your salary, the maximum pension is just over $30,000- a year v $18,500- on say our old age pension. If your on a  lower income the difference between getting $25,000- and $18,500- is massive. On how much it is in debt or broke, Social Security, at present the official number is 20.3 trillion, they will change the payouts cut the real top rate, likely raise the lowest retirement age even for partial pension from 62 to 67 and eventually 70, but the numbers of the 20.3 trillion in the hole are worked out on a mere 20.3% over the age of 65 in 2030-2040. As Germany will be 32% over the age of 65 and others with similar life expectancies are 28-30% the hole is in reality likely using 28% around 40 trillion not 20 trillion. Of course they will change the laws.

It is however not WELFARE when you contribute all your life to a pension and the government spends it instead of putting it aside. Mr Greenspan now calling it welfare v retirement savings is the difference between calling something borrowing and theft.

I suspect 50 million people who will rely 100% on this will decide the issue in coming years. As for actual government employee’s, postal workers, army navy and so on. Again some is contributed via the workers, the rest meant to be put aside by the government has not been. There like Social Security is around 3 trillion in savings v a vast pot of liabilities and pensions needed to be paid out. In the case of Federal workers from Judges to National Parks and so on, the average liability in the retirement pension is not around $20,000- on average its a hell of a lot more. The number is close to $50,000- per annum and whilst this number is vastly smaller than those on social security, the income level is 2.5 times more. Again these fictional life expectancy levels have been used which are defied by facts. Countries with older populations like Japan can easily be seen. One with those actually now hitting the over 65 crisis sooner than the USA can also be seen and factual numbers used, but nope the USA since they are broke has gone the other way. This debt officially is 10 trillion for government workers. Unlike Social security this will not go broke it will just not go into credit until 2085. That assumption is made via the money actually being set aside and saved which it seems never to happen. Its always next year.

Whilst Mr Keating was on TV last night, love him, hate him, he was the one who made super contributions in Australia what they are. It was introduced in 1992, came in 1996 and by the time your 65 or 70 if your 30 now, you should have even if not wisely invested an amount that is 5 times your current salary for retirement. It may run out if you are lucky enough. There then is the safety net if needed of a pension the old age one. 

I know I am dwelling on the woes of the USA, but their fiscal problems will become the worlds headache looking forward. They cough we falter. 

I am of the belief and not a weird conspiracy theory but one based on scientific facts that these keys will implode the US Budget and debt moving forward. Any economic problem that arises from here with all ammunition spent on the GFC leaves the market to correctly reprice risk.

Equities in the UK and US at 30-40% above those of the EU or Australia are a result of these out of control policies. RISK is always there. It can be masked, dressed up and made sweet-smelling but it is always there.

Right now as is always the case at peaks in markets the USA  has record margin investments in equities, record confidence levels in the upward direction of markets. 

A simple test is two companies both who outsource manufacturing to say China. One in the EU one in the USA. Both selling exactly the same product lets say its thongs. Both sell exactly the same amount, same profit margin, everything the same P/E EPS both in business for 30 years. In the USA the company twin sells for 30% above the EU one, in the UK for 40% above the EU one. To me yes it is a question of valuation and fundamentals you buy the one cheaper, but when the whole index, every company on average is priced this way is where I leave the equation and go, either one is a bubble or the other is mad.

Anyhow, back to those with Social security, Government pensions and those unemployed in the USA. I have quite a few people who I love who live there in the USA. I know some of them are doing it very tough now. I wish it wasn't so but sadly it is. Some are the missing links in this unemployment number and have dropped off the official radar and being counted as even unemployed. My friends came from the finance industry but before it went made, from the 1980's and 1990's. What no one told me and them was your life in the industry was limited for most other than politicians and managers. A trader who lasts till he is 30 back then was considered lucky. Nowadays these decisions are made by computers on the main. Most changed careers and experience didn't matter. For me, I was lucky and most front line traders burn out by 30 or 35, I was a freak and still am at age 49. My friends went to many walks of life from some associated with markets and commentators to others in management, to others who took totally different directions from furniture making to photography.

Much the same for the Australian colleagues. Out of all those thousands I knew only a handful still make their primary income from trading or investing, risk taking. Of course there is little sympathy for our types, the media just loves us. It wasn't till recently I looked and since 1998 on three different sites I have contributed over 6,000 pages, not for reward or thanks, but to give something back. 

We live and we learn. I know how futile on the main some efforts have been. Trying to talk someone fanatically and religiously devoted to a computer share in 1999 was a waste of effort. So too so many times in the years after this. I cant convince someone scared of the market falling to zero that when its down 50% its a great time to buy. Sometimes you can and its  a victory not for reward, but for them. 

We all live and learn and grow as time passes. My view of the US and UK side in 2013 is obviously a strong one as it was in 1999 and 2007. It is however a theory, backed up by factual observation but as age teaches us many things it teaches me how little I know about anything. Of course I can be wrong and would actually welcome it having just visited the reality of so many in the USA. I think they are in enough misery those at the bottom end of the equation. My thoughts and prayers today are with them all. 

For every good deed at times it goes unpunished. It is a sobering reality for me today with this view from the opposite side of the equation and the impact it will have if I am correct. I will however go out and do what one can, I would prefer others not to join into it and watch their savings possibly go poof. Whilst our equity markets are 30% below the USA and we will be insulated if correct, we will follow if there is to be a large correction. My real conclusion is that risk, when the dust settles will be repriced, so too debt and cost of it. Having if correct 3 corrections in 15 years will reprice risk to what it always should have been, a healthy respect. 

None of what is going on is even related to the great man’s words below, its not generous, its not true or even the truth. Its not even admitting a mistake when its in plain sight. Time to do something today and make it a day to remember !! 


“You make all kinds of mistakes, but as long as you are generous and true and also fierce, you cannot hurt the world or even seriously distress her.” 
WINSTON CHURCHILL


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## kahuna1 (15 November 2013)

Ask the question !! Even questions you DON'T want to hear the answer to, not to want the answer is even more dangerous than NOT asking the question in the first place. Only Idiots never ask in the first place, or those who are wise enough to know the answer will be a lie.

Hi

I was going to bother, but decided not to.
Yellen's testimony was a joke,



Market poised just below the brick walls technical side I have been talking about for some time. FTSE hit it first in May 2013, followed by the DOW and now the S+P has caught up. Next 1-2% is key, next level is about 7% higher than that. Going on Yellens testimony it is and was a joke.

Lets look at the silly GFC highs to lows till November 2013. Done on the 14th November 2013.

FTSE 350

FTSE 350 had a high in October 2007 of 3,518

FTSE 350 had a low in March 2009 of 1,825 … a loss of 48.1%

This index lost least of the ASX 200, S+P 500 and DOW in the GFC !!

FTSE 350 had a high in May 2013 of 3,696 .. a gain of 102.5% from GFC lows

It is a NEW high 5.1% higher than the pre GFC high.

This index has stalled and has NOT as yet broken a new high since May 2013


DOW Jones 30 DOW had a high in October 2007 of 14,198-

DOW had a low in March 2009 of 6,470- a loss of 54.4%

DOW had a high in November 2013 of 15,821- a gain of 144.52% off the low

Recent high is barely higher than the August high and the market put on the vast majority of its gains by June 2013 5 months ago. The high in June 5 months ago vs the high today is less than 2% higher.

This new high in 2013 is 11.4% higher than the pre GFC high.



S+P 500

S+P 500 had a high in October 2007 of 1,576- S+P 500 had a low in March 2009 of 666.8 a loss of 57.7% from GFC high

This was NOT the hardest of all index's HIT in the GFC we are looking at here.

S+P 500 had a high in November 2013 of 1,782- a gain of 167.2% off the low

S+P has played catchup to the Dow and FTSE in the last 5 months.

This new high in 2013 is 13.1% higher than the pre GFC high.




Eur stoxx 50

Which is the 50 largest European Stocks !!

Eur stoxx 50 had a high in October 2007 of 4,489.8

Eur stoxx 50 had a low in March 2009 of 1,810- a loss of 59.7% from GFC high This WAS the hardest of all index's HIT in the GFC

Eur stoxx 50 had a high in October 2013 of 3,068- a gain of 69.5% off the low

NOTE the October high has not been broken but its close.

The Eur stoxx 50 HAS NOT broken the pre GFC high and is 31.7% BELOW that high !!

Like Australia the EU has maintained a tighter monetary policy, a much tighter fiscal policy and has Not entered too much into the buying of bonds in markets which both the UK and USA have. As a result EU is been punished vs UK and US markets for taking a sane approach vs them.

ASX 200

ASX 200 had a high in November 2007 of 6,851.50

NOTE ours is only in NOVEMBER 2007 vs all the rest because the high was on the 1st November 2007 and we are BEHIND moves in the UK and US and FOLLOW them.

ASX 200 had a low in March 2009 of 3,120.8 a loss of 55.2% from GFC high

(note low was adjusted to 3,070 ish index rebalanced in 2010)


ASX 200 had a high in October 2013 of 5,457- a gain of 77.8% off the low

ASX 200 HAS NOT broken the pre GFC high and is 20.4% BELOW that high !!

Very much the same as the EU the Australian Market is performing much lower than the US market. This is caused almost entirely by both monetary and fiscal policies. At out WORST the Australian Federal spending was HALF that of the USA in terms of deficit to GDP. IN relative terms as of November 2013 Australia is 31-33% below the USA equity market in performance post GFC and 26% below the UK. Both the UK and USA have had zero rates for some time driving investments into equity bubbles never seen since 1929.


Comments:

As such relative to the USA the EU stocks the large ones are trading 31.7% BELOW the GFC highs and in the USA they are 11-13% above. In other words relative to GFC highs the EU is 42-45% BELOW the levels of the US and around 36% below UK equity highs.

The impact of a debt crisis cannot be underestimated and its potential impact on equity prices. In the USA its been ignored. Any discussion about a US federal debt at 107% of GDP is toned down. EU equities at 45% BELOW the level of US counterparts is evidence of this pricing.

Risk also I suspect is part of the EU under performance, but it is a perception of risk, NOT a reality.


.............................


I did write a lot more. Its besides the point after Yellens comments.

No one asked about the US goverments own fiscal hole. Yellen asked about house prices denied there was a bubble or any bubble this is with prices in San Fran hitting all time highs again. she missed the GFC, she missed this.

On US Fed policies and asked about the US fed being trapped or dictated to by the market ? She responded they were not.


You never buy an asset you cant sell. NOT EVER. there is no exit strategy for the US fed because there is in fact no market for them to sell 3.9 trillion dollars of bonds to. Adding to this at 85 billion a month or 6.5% of the GDP of the USA each year totaling $1- trillion dollars is actually the market value of all of the largest 25 banks their market cap in the USA.


Clearly no idea. None.


No one asked the question, or they did, but let it slide. No one asked hard questions because they didn't want to hear the answer. Factually the policy is not working. When you have the new US Fed chief saying with asset prices in many classes hitting all time highs, and asked about this she denied this as a problem, sadly it is a problem.

Only time will tell. I should not have expected any other response from the new US fed Chief. Dr Yellen. She is a Dr ? I must send off for my own Doctorate in Astrology its $19.95 and will be here in 7 days. Economics and Astrology are both social sciences so we will be equally qualified !!

Technically US side has a lot of barriers here on the S+P in the next 20 points up to 1,813 on the S+P it breaks that its again a long way until the next stop another 6-7% higher.

I am upset no one asked any questions, in many ways too honest and naive actually expecting it.

The end I suspect as always being a realist will come from the creditors refusing to lend and China along with japan and others I suspect are looking at this latest twist with similar eyes as to the new leader of the US Federal reserve and shaking their heads. I do as I said actually believe China is already taking very positive steps to diversify away from USD and this is what the rise in yield in the US bond market is about more than anything.

I am just going to sit, watch and shake my head. Eventually the disparity we have above in equity prices will be resolved. So too the debt side. If its not going to be letting air out of the bubble its a 1929 style explosion we must have.

Take care

Mark


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## kahuna1 (19 November 2013)

“For me, it is far better to grasp the Universe as it really is than to persist in delusion, however satisfying and reassuring.”

CARL SAGAN

PDF ... the Illusion Dies

“How strange when an illusion dies. It's as though you've lost a child.”
―Judy Garland


The Illusion Dies

View attachment The Illusion Dies.pdf


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## qldfrog (20 November 2013)

jahuna, just to thank you for your work. It is read!


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## kahuna1 (21 November 2013)

Hi,

A bit long, but such is life. Sadly amusing at least for me.


Santa’s SECRET GIFT


View attachment Santa’s SECRET GIFT.pdf


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## kahuna1 (24 November 2013)

Hi,

A couple of questions they forgot to ask the new Fed Chief Janet.

The question and the title of this paper Dear Janet, is the question someone should have asked. Janet did you tell anyone that 300 billion has been wiped in the mark to market value of the US Feds holding of long dated securities in the last 12 months ?

There are a few more.

ITs long, market poised at record highs. I think its important to know whats driven it there, what has been not mentioned and the fact is 300 billion whilst not a lot for an out of control USA buys you ANZ NAB and CBA  ..... or the two largest US banks.

This is for a policy, a theory, an untested one which actually does the opposite of what its meant to. Its slowing the economy DOWN.

Anyhow if your interested.

here is the PDF


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## kahuna1 (27 November 2013)

“Let your plans be dark and impenetrable as night, and when you move, fall like a thunderbolt.” Sun Tzu 

Today yet again sitting here poised below the 1,810- barrier on the s+p 500 poised like naughty little boys going, should we, shouldn't we? The 1,810 level is as one can see, one of those brick walls for the market. Whether we break what merely is a technical level of some importance or not is still up in the air and has been for several weeks which makes its importance very clear even for the technically blind. 

Economics and predicting the future is always full of uncertainty and this year two men won the Nobel prize Fama and Schiller. Shiller I respect as he uses scientific methods to call markets and Fama doesn't. Fama actually thinks markets are rational, are correct and believes they are efficient. He won a noble prize for it. Shiller on the other hand predicted the last two crashes. 

One believes in fantasy, one believes in reality. Both are rewarded and called respected. Fama actually derides Shiller and him calling the two last recessions and calls it luck. Personally I would like to go hit him over the head and get him to wake up.

Obviously I am the very scientific side of the economic equation. In 2013 my biggest problem is not the actual reported numbers, or the media as Fama thinks about, but the scientific examination of those numbers as presented. I don’t actually agree with Shiller. Both have Nobel prizes but they with respect miss things which drive markets overall.

In recent months I have covered a few. I call them normal, what is normal and what is not. 

In 2013 the earnings appear to be following the marekts rise, but for a reason. A few in fact. They are buried within my own massive economic model and only come out to play when needed. I put a chart in a previous piece about US corporate tax take. Yes earnings are going up, but in 1995 corporate tax take was DOUBLE what it was and is in 2013. So too personal income tax was 30% higher as a ratio. Each has a role to play in the actual level of an index. Oh and government debt was 33% of where it is now. 

The scientific study of things in the end overruled the media hype in 2000, the frenzied buying and how I filter one against the other and was able to remain bullish till very late in the day was of course via the technical model. The momentum was massive, wave after wave of buying which didn't stop till late 1999. So again it was a scientific model not one which listened to media or fads or as Fama puts is calls the market rational.
Same in 2007, the housing side was shocking and the problem late 2007 was the gap between the reported numbers and reality was getting wider and wider. Complaining about a GDP number 3% above reality, CPI 2% below reality, in the face of a market which was 100% overvalued was my driving force. Picking the actual stopping point was my smart technical machine with 30 years of tricks which went this is a brick wall and a beauty and that is where it stopped in 2007.

Fama said to Schiller with similar results but not using a technical machine and bearish for 12 months or more prior to the eventual high, Fama the other winner of the Nobel prize calls Schiller lucky. He states if Shiller was able to call the next 10 bubbles he might agree with him. I am somewhat amazed by this and it explains the mindset of idiots like Greenspan and Bernanake and now Yellen to me. They actually are from a religion that worships the Y2K event and hold meetings there. They are also members of the flat earth society believing the earth is actually flat and if you go far enough you will fall of the edge.

Being honest, I have no idea if this 1,810- level contians the market and the much-needed letting out of steam of at least 10 bubbles happens. I rate it as very much a maybe with the leader of the flat earth society Yellen now about to take over at the US Fed. The problem I thought I had in 2007, the bubble I could see and was horrified by its size, I see another one or set of ones which are potentially a lot worse in 2013/14.
In 2013 however the flat earth society is driving things. Bernanake Yellen and the ghost of Greenspan. George W is back on the white powder and is helping them along with Robert my good friend from Zimbabwe.

Pushing this to one side, it is not going to make anyone money being SHORT or square when the market rallies. I know this, I actually preach this. When the market gets to these peaks, reduce or sell. When the world is falling apart its time to buy. When fear has actually entered their eyes buy then. Funny thing is  as the market approaches this peak and slowly, the bottom will be another one of these levels hidden from most peoples eyes. For 6 years I bothered with these short-term technical barriers and arrogantly talked about highs at times 8-10% above the market or when one was broken on the bottom a low 8/10-15% below where it was and eventually with some accuracy we hit these levels. Fama and his view of Shiller is actually a dangerous idiot in my eyes. Telling Shiller to predict the next 10. It is hoped you only have 1 in your lifetime. We only had one and it was not even a big one up until 2000 in the first 40 years I was here. Now we have 3 in 15 years !! 

For me this level breaks the next one is 1,940 on the S+P 500 and I feel the market does not have the steam to get there. On the other side the size of the bubble is such that I call the US Feds actions Bubble masturbation because that is what it is. Its something never seen before, not ever. 
One never should mistake luck with skill. In the case of Shiller, it wasn't luck.

I can arrogantly say, yet again the market like in 2008 is on borrowed time. 
My little article named Dear Janet, pointed out the US Fed had LOST 300 billion or 6 times its capital in 12 months. Lost 140 billion or 2.8 times its capital on recent purchases.

Why one can safely predict the end is near, and be arrogant about it, is not that fact, its the fact that EPS, valuations and how the fabric of the market is worked out is totally linked to the long-term interest rates. Last 14 months have seen one of the steepest rises in yields ever. Looking back in history how many times has the long yield risen this fast and it not caused a serious correction ? Never. MR Fama is worried about the media, I could and will make him cry if I could but in 120 years the most serious corrections in fact 6 out of 8 of them have been caused by what ? A steep rise in yields long end. They range from 25-46%. Every time it happens stocks tank. Why ? 

It is the bedrock, the foundation of all valaution. Bond yields hit absolute ZERO and I will explain another day this one but its another one of my quirky fundamental rules of money. Break it, you regret it. One already is being broken, that is, never lend money below the inflation rate. These are rules number 2,3,4. And bond yields hit what I call absolute zero in 2012 and the US fed actually lent and lent a lot at the lowest possible return ever. 

Stupidity on this scale needs to be rewarded, and it has been, just not reported loosing 300 billion or 50 times the size of the largest ever rogue trader.

This is not why I can arrogantly stand here. Sure the 1,810- barrier may be breached, its really an aside, because unlike luck, gravity has its own outcome and MR Fama can throw a tantrum and call it luck, but he wanted Mr Shiller to predict 10 corrections or bubbles, this is not about a bubble but a fundamental law of money in existence for 2000 years. If the long bond yield rises 1.3% the NPV value of all assets actually tanks about 10%. This is not about the bond losses, this is the fundamental value of all assets. So in 2013 with the market going up 30%, the actual value going DOWN 10%, its on very borrowed time.

Then on top of this, someone out there beyond the US fed is holding 10 trillion of very long dated bonds and has lost 1,000- BILLION. It may only be half held in the corporate world, but 500 billion vs a total profit of 1,800- billion is a considerable amount.

This is already showing, seemingly not understood in the USA but so far 90% PLUS of companies have come out with earnings WARNINGS. How much of the estimated 500 billion do they report ?  Or do they put down to one-off blips or for the underlying actual valuations of every asset, 2012 vs 2013 long bond rates, the ones used to work out NPV the loss is around 10% of each index's value. Sad thing is, everyone is liquidity short in the USA, long-term coverage. US fed has undone any raising by the US treasury and by about 125%. 

Should be an interesting reporting season and 2014. Yes the market is stuck here at my 1,810 level  on the S+P 500. It may breach it. I accept that, but the gap reality, vs underlying value is 40% apart.

Take care 

Mark


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## kahuna1 (30 November 2013)

Hi,

Well getting value for money this 1,810- level in the s+p 500 at least.
Yesterday was a massive retail day in the USA and most took the long weekend taking Friday off after thanksgiving.

Out of retail sales in the Christmas period about half of them are made by value on this day, the Friday after thanksgiving. Stores already had wheeled out massive discounts this year so whilst I don't rule out some spurt on froth about this news when they report next week on the sales during this yearly spending frenzy, it will be at ultra low margins as the retailers in the USA like most other places are struggling. 

If you were wondering what is happening with the US budget ? Nothing. No progress and there are mandated spending cuts in place but they will take us nowhere. No where at all. Other side of the coin is this slowly building pressure as people get older which will wipe out any of the cuts. Having for example defence take 19 billion cuts on a 600 billion budget, is positive but on the flip side the increases ALL budget committee’s agree on Medicare, Medicaid and social security reverse any of these cuts.

One politician was asking why there is no plan to reduce this gap and his ambitious plan was to cut 2 trillion by 2023 from the outlook. Having looked in depths at all three budget office estiamtes all three have the deficit in total growing to 21 trillion in 4 years, and even here they are actually at least 2 trillion behind what is reality. So in 4 years I believe it will be 23 trillion the US deficit vs 17.6 trillion early next year. 

What is sad, scary and illegal in most countries is the basis of these estimates on the US side, they are low-balling expenses and high balling income. And to make it all look pretty they are calling for a massive recovery each year from 2014 into 2017. How much ?  Well their estimate is that the US economy grows by 24.4% to 21 trillion by 2017, so the actual debt to GDP ratio is a mere 100%. I can safely say their calls on increased income are at least 400 billion over the top and an increase in corporate taxes of 86% by 2017 are impossible to see. An increase of 38% in income tax, equally absurd and similar growth in social security virtually impossible.

So what actually gets GDP growth to 24.4 % in four years ? This is what they are debating the underlying fundamental of DONT WORRY in the USA as there is a mad rush for the cash register. Well I believe it means INFLATION plus GDP GROWTH will equal 5.6% each and every year from 2014 to 2017.

Wow I can sleep easy now !! Knowing that inflation is falling, EU is likely to be around 0.5%, USA it's also going to be low in 2014 likely sub 1%, this means … WOW … US Senate US house and US White House are debating a document where it has built-in that GDP growth estimates in the USA are going to be 4.6% each year. 2014 is 4.6% GDP growth and so on.

What is so delusional about these three budget office sets of numbers is people and markets are actually swallowing the largest load of poo and asking is they can have some more. The budget offices are called the CBO, GOB and the white house has its own inept OMB. Office of Management and Budget. Just out to 2017, I estimate the US economy is likely only to grow by a mere 10% over 4 years. Already 2014 will be low inflation and things are SLOWING down all over the place. EU is worried about going into negative growth. So I think 2014 is a write off.

Problem is asset priced and bubbles, eventually must follow a period of falling prices. US fed stopped this, stopped any pain. And with house process back at 2007 levels in may places, US stocks at all time highs real unemployment at 11% not the 7.2% reported, where is this 4.6% GDP growth going to come from ? 

This is out to 2017, not longer. Just 4 short years vs the 3 clown budget offices in the USA who really don’t expect people to eat chocolates smelling like poo but are hoping no one notices this inbuilt massive growth spurt to make it look ok and the economy grows the debt stops going up relative to GDP. I am sorry but in 2017 after many weeks looking at the numbers. If you raise corporate tax by 86% in 4 years the market will not be where it is as EPS is after tax. If you raise the tax take on income tax 38%, how likely is GDP growth of 4.6% not at all.

In the end I estiamte this time in 2017 USA GDP grows likely only 1.5% a year, inflation is 1% a year so total GRP of USA is around 17.7 trillion.
Debt and spending, they admit to 21 trillion the three clowns, I suspect its 2 trillion higher because I know 4.6% GDP growth will not happen, not will the increases in tax, So debt in 2017 for USA 23 trillion likely size of the economy is 17.7 trillion. That is 130% of GDP. Close to Italy. OH and lets not forget the USA guarantees the agency debt of the housing loan side via the US fed buying MBS securities for agency debt. In 2013 that’s 9.2 trillion its backing and being nice by 2017 it will be 11 trillion so the USA will have 34 trillion its standing behind on the federal side … its only 192% of GDP.

For me, maybe 1,810 gets trodden into the ground and they kick sand in my face as they pass.

I do know bond investors already not amused and raising the long bond yield by 1.3% already will be the ones dictating the outcome.

So the three budget offices are presenting numbers out to 2017 that debt will rise to 21 trillion. They admit it. They then estimate it will only be that high as corporate taxes rise 86% personal ones 38%, the spending side is set in stone, big numbers are Medicare and social security followed by 250 billion pensions and of course defence.  They claim US GDP will be 21 trillion in 2017 but I suspect a GDP growth number of 4.6% each year is dog poo or those funny smelling chocolates Janet keeps handing out.

Reality, truth, closer to the story is not as much income from taxes so deficit is 23 trillion. Size of the US economy in low growth low inflation environment which is very clear for at least 2014 …. 17.7 trillion. Am I myself low-balling the outlook ? I can see the asset bubbles and eventually pre 2017 one if not a few either deflate or explode. If that happens my numbers are generous. I do accept there is massive scope for improvement, no question. This said in 2014 it looks and feels like a very slow GDP year in the EU, UK numbers whilst looking ok have the lowest investment in 55 years and are just consumer based. USA with the impact of the 1.3% rise in the long bond just starting to roost, I sadly expect pressure on EPS in 2014 and slowing of the housing bubble Ben built and cant see. So 2014 below, 2015 same , maybe I am out 5% but not 30% and this is without a bubble bursting pre 2017. 

One is representing to unwilling investors a debt to GDP ratio of 100% in 2017.

Second is I suspect realistic and has USA debt to GDP at 130% of GDP.

One is fantasy and one is closer to reality.

One is criminal and one is practical.

Investors and nations are funny things. You can have a relationship with someone for 30 years, but that can be destroyed forever in a moment. 

I do not believe I am being unfair with these numbers. Google the three clowns and read their papers and pull them apart. You will be horrified. I was.

No Christmas presents for the three clowns.

Take care 

Mark M


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## Timmy001 (26 September 2014)

Nice video robusta.


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## kahuna1 (4 August 2017)

Howdy,

Finally ... its going to still take time ... 10 chapters

Number one

*100 million lives DEMOCIDE*

*1/ Extinction Level Alert . USA Equities, global implications*

As of today 26th July 2017 *all three of my Models* in effect are screaming over-valuation and we have FINALLY reached the target as identified over 12 months ago of 2,480-2,500 on the First two models.

Nothing CHANGED for me to set off my Adjusted RISK model other than the market having HIT what is clearly historically idiotic valuations.

Well I may be telling a lie on *WHAT s*et off my NOW demanding as of today another 25% on RISK making one measure of it 300% overvalued the VANILLA risk model but the RISK adjusted after demanding 25% MORE ... its at 400% ... Higher than even 1929 and a level that IS DRIVEN by a belief that of the three biggest risks to humanity, one being Nuclear, one being climate change the third is clearly associated with the first two, via impacts potentially it has one them.

Enjoy
Mark M

All rights reserved.


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## kahuna1 (7 August 2017)

Howdy,



Chapter 2



*100 million lives DEMOCIDE*

*2 Oligarchy - Who really is in charge ... DEMOCIDE*


Democide

Democide can also include deaths arising from "intentionally or knowingly reckless and depraved disregard for life"; this brings into account many deaths arising through various neglects and abuses, such as forced mass starvation.



*https://en.wikipedia.org/wiki/Democide*

Enjoy

Mark M

All rights reserved.


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## kahuna1 (13 August 2017)

Howdy,


Chapter 3



*100 million lives DEMOCIDE*

*3 Demographics-theft of 30 trillion v280 million loosing 25 years of life*


*Driver less cars .... FOR a POPULATION FREE USA ?* I get it now, driver-less and passenger less cars, going no where, all to pretend there are NOT 100 million dead ? Well done. AI was meant to be the threat to humanity, as always is the case, the real threat is LACK OF HUMAN INTELLIGENCE that will end us well prior to that it seems.





Enjoy



Mark M



All rights reserved.





_All views expressed are my own opinions. While I take every care when posting no guarantee to the absolute veracity of the postings is given or implied. Please do your own research and consult a professional investment advisor before investing. _


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## kahuna1 (21 August 2017)

Hi,

Chapter 4

*100 million lives DEMOCIDE*




_*4-USA cost in lives so far 10 million till 2010, rising to 50 - 100 million*_




Again confirming the lack of humanity a government hell bent on stealing from the poor and killing them to cover it up, can and will go to.

*This above again highlights their new benchmark for being poor/ in poverty. It fell from 34.33% of the average wage in 1994 to a mere 23.29% in 2017. *

*Anything the Leaders, NOT THE PEOPLE of the USA have to say, to my nation, or any other, should be ignored and treated with deserved complete contempt. *


Enjoy

Mark M




All rights reserved.


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## kahuna1 (26 August 2017)

_Hi 

Chapter 5 _



*100 million lives DEMOCIDE*


*5- Lower than low- theft from below the poverty level*





*THERE ARE NO SPIKES IN CPI .... according to them2000-2008 . There was NO GFC, NO house price rise of 100% between 2000 and pre GFC peak and NO rises in anything else. Hence the missing 25% of CPI shaved off the poor and fixed to CPI income side. Basically the poor lost ... again .. even the stupidest of economists can SEE this is missing. Why cant Yellen or Bernanke ? *



Actions so far .... in the USA post 1980



*Virtually wiped out its middle class. *



*Lower middle class resides where working poor/poverty used to be.*




Enjoy


Mark M



All rights reserved.





_All views expressed are my own opinions. While I take every care when posting no guarantee to the absolute veracity of the postings is given or implied. Please do your own research and consult a professional investment advisor before investing. _


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## kahuna1 (1 October 2017)

*Howdy,

chapter 6*

*100 million lives DEMOCIDE*



*6- Healthcare USA style, MAD, Mutually Assured Death *




_*Clearly actual USA POPULATION is falling and FALLING quicker than one would expect. PEAK USA population … PEAK …. I suspect something not seen EVER according to USA census, with ZERO NET ILLEGAL immigration, less than a million legal and falling birth rates, increasing DEATH RATES, PEAK USA population likely in 2040 .*_




_*With CDC producing a very slow, inaccurate in the extreme, still working on 2014 numbers and even Census using again absurd forward projections in most instances, the fact is, Census likely will revise its estimated 2050 population number DOWNWARDS towards 350 million by 2030. Less than 50 years prior to that, the accurate estimated number would have been around 450 million given present immigration levels and birth rates. *_ 



_*What changed ? *_ 


_*Whoops is that 100 million LESS ? Post 2050 think like Japan if this policy goes on in relation to the USA overall population. An increasing mortality in the lower 80% is NO less devastating on overall population numbers than the issues with Japan. *_


NB ... sorry for pause .... got some new data and had to look at it ...  market meanwhile clearly NOT stopping .... not that I am going to chase the USA one and right here is at the stop loss ... of standing aside and closes much higher than say 2,515 on the S+P 500 and technical model will aim for the next new high which is another 8 % up ....  


_*Enjoy


Mark M

All rights reserved.*_


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## kahuna1 (8 October 2017)

*Hi,

100 million lives DEMOCIDE*



*7- What is NOW totally unreliable ? v 25 million loss of life*





*The reality …. the REAL PICTURE is so obscured by self interest groups that its insane. *



Basically these departments use any number, ANY to paint a fiction.



If its CPI, lets remove the GFC housing bubble, if its estimating the cost of medicare say 10 years into the future, Medical costs in the USA for 20 years have risen at 3-4% above reported CPI, which somehow gets lost in the reported CPI numbers BUT NOT … the overall cost. Hard to hide the REAL total cost and its now bumping 20% of GDP in the USA which is impossible for any nation anywhere to fund.



IT is sadly in plain sight. In very plain sight. Meanwhile the USA plays economic terrorism with the rest of the word and corporate criminals and tax thieves sent out to sell products globally but pay no tax, cannot go on.



We can imitate the USA, and develop a wonderful two tiered system where the elite live 30 years longer than the poor. Some elites feeling guilty on one hand collect 3-5 billion in non payment of tax each year and then do good, giving it away to even poorer nations …. but half that TAX theft comes not from inside the USA … they are trying to enforce their view upon the rest of the world if allowed. Simple as that. Nations loosing 3% of GDP in tax to these crooks has to stop, or not.



Only reliable thing I can tell you is if Trump tax plan and 20% corporate tax is a reality in the USA, every person on over 250,000- even $200,000- will find it worth their wile to pay themselves into a company and legally and totally avoid paying 30% personal income tax, avoid likely 12% social security and avoid likely 4% medicare tax.



*NONE of the USA reported economic statistics post 2000 bear much relationship to reality.* All have been sprayed with flower dust to make them smell pretty.



T*he sad irreversible reality is NOT a mere 25 million but closer to 50 million are already LOST.*



What is reliable is the following.

40% of Americans HAVE NO retirement savings outside Social Security.



In 2017 the USA had the LOWEST NET POPULATION GROWTH since 1937. It was NOT falling immigration, NOR net illegal IMMIGRATION …. NOR lack of baby births … they had and still remain LOW and falling but have been around the 1.7 births per woman for the past 10 years. *The FALL had to do with massive and SCARY falls in expected/actual mortality.*



…*..*



*just a few bits in the chapter …. *



*enjoy*



*All rights Reserved*

*Take care *

*Mark *


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## kahuna1 (22 October 2017)

*Hi,,

  Paused Again

*
*Bottom line, the lower 80% of USA, 260 million people, since the DRIP DOWN economic experiment started in 1980 have LOST … 6 years of life. The top 1% will always have life expectancy of top of OECD plus 5-8 years and USA no different. Even the top 10% are OECD plus 5 years, the top 20% enjoy on average in the USA OECD best so 84 years PLUS 3 years, so 87 years, the LOWER 80% already are at 72 years and falling. 



Without a doubt, with almost 100% confidence, the number will fall to 67 in coming years.



Will be back with chapter 8 in a few days ... and so on .. apologies for the delay ....



Cheers Mark*
*

https://www.aussiestockforums.com/a...1/?temp_hash=2bae3e4700d3eca1e1ef80f5af0eba19
*


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## kahuna1 (29 October 2017)

Howdy



*100 million lives DEMOCIDE*



*8- Worst case scenario 100 million loss of TOTAL life, 285 million loose 25 years of potential life*



How the hell CAN 80% OF a population loose 10 years life expectancy compared to the rest of the world in a mere 30 years ? Its called DRIP DOWN Economics and not taxing the rich, not funding either medicare, which Was free essentially in 1985 now costing close to $300,000- for a couple and a projected $400,000- by 2025 or 100% of the pension paid to USA retiree's of whom 40% …. HAVE NO OTHER SAVINGS.

_*and a bit latter ....*_



anyhow back soon with chapter 8A … The Title of it … will have to be decided.



This IS not being anti USA, the fact is, of OECD nations, NONE of the 48 has seen a move like this. Nations that HAVE allowed for healthcare and pensions for elderly and life expectancy is NEAR OECD highs as it was 30 years ago, HAVE NOT done so at any cost economically. NONE.



Germany and Japan and all EU nations. Some the USA looks down its nose at, adopted a BEST case, as their model back in the 1980's have seen massive gains in both overall life expectancy such as say Singapore rising from age 70 about 6 years under best OECD back in 1985 to age 82 expectancy a near high result now.



This has NOTHING to do with stimulating economies, GDP growth or drip down effects, Japan and Germany have OUTERFORMED USA in BOTH post 1980. And in this their PEOPLE have also enjoyed the expected benefits in terms of spread of wealth and LIFE EXPECTACY. USA meanwhile has bankrupted the lower 50%, even the lower 80% have HALF what they did. Life itself already shortened 10 years in relative terms, is assured to hit 15 years no matter what. Unfortunately, past scientific results assure me sadly that 20 years LOST if likely if not 25.



All so Mr Trump. Buffet, Gates and the Oligarchy of corporate and self interest groups pays no tax. I cant imagine NOT paying any tax to a modern government for someone born with a disability. Sadly, these proud Oligarchy members have done so with the blessing of the rest of the world. SO lets cut taxes, make it official and export our own form of GREED and Genocide to the rest of the world. IT does work, if that's their goal, extreme wealth and income inequality, extreme variances in basic life expectancy bordering on the obscene forms of genocide practised in the past. Please don't ban plastic bags before they have finished as they MAY need them !!





***************



Back with a new chapter and possibly a few headline stories ... as this deserves topics all of its own ... DEMOGRAPHIC, and other things already uncovered ...  just not obvious till pointed out their significance.



take care

8- Worst case scenario 100 million loss of TOTAL life, 285 million loose 25 years.pdf

Mark M

All rights reserved


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