Imminent and severe market correction

Uncle Festivus · 14 December 2010

Is it that time of the year again? Only 9 sleeps til Festivus!

It's also that time of the year known as the silly season, and this year is shaping up to be one of the silliest - in financial terms that is. For we find ourselves with compelling fundamentals that Mr Market is simply ignoring or is at least going to have one last hurrah before going out with a good old bang!!

Now the various central banks can paste freshly printed money over any leaks appearing in the debt dykes for as long as the market goes along with the ponzi scheme, but the underlying deteriorating global economy will eventually dictate the terms of capitulation.

Is the global economy deteriorating?

We only have to look at the poster child of 'growth', which when applied to China may or may not mean anything at all as most of their figures are 'made to order', the order of the central gov. Chinas' massive money and goods inflation problem(s), which has resulted in a huge property & infrastructure construction bubble, has not been addressed as they steal one of the capitalists Achilles heals - failing to take the hard decisions. Chinas' version of QE 1 finished last month, so now we wait and see how many bubbles go pop!

The overdependence on new real estate in China, when the demand isn't there, will cause the nation to eventually "hit a wall," hedge fund manager James Chanos told CNBC Friday.

http://www.cnbc.com/id/40605908

The US has so many problems it's hard to know where to start!

Property is still taking a fall and will continue to -

U.S. home values are poised to drop by more than $1.7 trillion this year amid rising foreclosures and the expiration of homebuyer tax credits, said Zillow Inc., a closely held provider of home price data.
This year’s estimated decline, more than the $1.05 trillion drop in 2009, brings the loss since the June 2006 home-price peak to $9 trillion, the Seattle-based company said today in a statement.
“It’s definitely going to continue into 2011,” Stan Humphries, Zillow’s chief economist, said in an interview on Bloomberg Television today. “The back half of 2010 looked horrible and 2011 should look like the mirror image of that.”

Article here

The cost of money is going up! Bond massacre continues......so when will Bernanke start to raise rates - never! Interest on interest now........

Muni debt - Build America Bonds scheme is finishing up end of 2010 - at the lowest level of government they are - broke!

The US government will most likely raise the budget debt ceiling, somewhere around 16 trillion or so now - the US is insolvent.

Markets at extremes -

VIX getting lower
Commodites longs at all time high
ARMS (TRIN) extreme - an abnormal level of 'up' volume versus 'up' issues ie the old plunge protection team is tricking the market, again
Insider sales continue at vastly disproportionate rate to buys
etc etc

Give it a Christmas rally or so then the fireworks will start in earnest..........??

Aussiejeff · 14 December 2010

Heard a rumour that Robots will be posting a pair of cheap, Made-in-China, Rose-tinted glasses to each and every ASF'er for Xmas!

That should brighten us all up for the New Year.

Thanks, Botty.....

Merry Xmas to all...

Uncle Festivus · 25 December 2010

Adjusted for inflation, the economy is back to its peak prior to the recession of 2008-09

So say's Rupert Murdocks' Perma-Positive plaything Marketwatch.

Yet it only takes a few minutes to get the facts from the Fed to blow that 'assumption' out of the water, amongst other 'made to measure' data releases interpreted by financial commentators with the usual negative news dismissiveness and anything remotely positive as heralding the end of the global recession. The word 'unexpectantly' will be used a lot in the next few months?

Time to update the Jaws Of Death, but this time also add a lovely chart for the UK, which possibly is in a worse predicamet, yet employees of 'The City' still blissfully ignorant of pricing in the future further than their next bonus?

US debt = approx 14 TRILLION dollars
UK debt = approx 1 TRILLION pounds

Uncle Festivus · 25 December 2010

A great day to lay back & think of England

There's that word again - unexpectedly!

Very bullish news - market must go - UP!

VAT goes up to 20% in Jan.

2011 - the year of payback and reality........

UK budget deficit balloons to record high

Britain's public borrowing unexpectedly hit a record £23.3bn in November, the Office for National Statistics (ONS) said on Tuesday.

The figure, which excludes financial interventions by the Government, was a marked increase on the £17.4bn a year earlier and beat the previous highest monthly borrowing record of £21.1bn in December 2009, according to the official figures.

Full story

Everyones got an opinion -

Chinese media reported that Commerce Minister Chen Deming saying that the crisis may worsen in January and February, and that the â‚¬750bn (£635bn) European and International Monetary Fund rescue fund would not solve the problem as the rescue financing would eventually have to be repaid at high interest rates.

“These measures just turn an acute disease into a chronic one, and it’s really hard to say whether these countries that are in deep trouble over the debt crisis can recover in the coming three or five years,” Mr Chen was quoted as saying.

Maybe he should be more concerned with his own backyard, an inflation melt-up, blow-off top, and will have to take the bitter medicine eventually.........

What recovery?

satanoperca · 25 December 2010

Cheers Uncle, you make everything sound OK, the UK travelling along well and the US almost back from the jaws of death.

Must return to backtesting of shorting systems for the future that lies ahead.

May 2011 be a great year for all.

Garpal Gumnut · 25 December 2010

Uncle Festivus said:
A great day to lay back & think of England

There's that word again - unexpectedly!

Very bullish news - market must go - UP!

VAT goes up to 20% in Jan.

2011 - the year of payback and reality........

Full story

Everyones got an opinion -

Maybe he should be more concerned with his own backyard, an inflation melt-up, blow-off top, and will have to take the bitter medicine eventually.........

What recovery?

View attachment 40509

agree Uncle,

All gumnuts back in market.

gg

Aussiejeff · 26 December 2010

Uncle Festivus said:
Maybe he (Chen) should be more concerned with his own backyard, an inflation melt-up, blow-off top, and will have to take the bitter medicine eventually.........

Indeed....

‘Long-term Battle’

China raised gasoline and diesel prices by as much as 4 percent on Dec. 22 to reflect higher global costs of oil. Still, the increase was less than half of the gain in crude prices over the previous month and the nation’s planning agency said it limited the rise because of the “rapid increase in overall prices.”

The nation must prepare for a “long-term battle” against price increases, Peng Sen, vice chairman of the National Development and Reform Commission, told state television on Dec. 21. The root causes of inflation have yet to be resolved, he said, citing domestic supply shortages, gains in global commodity prices and excessive liquidity.

Inflation is likely to reach 3.3 percent for the whole of this year, breaching the government’s target of 3 percent, Peng said. The commission raised its expectation of average gains in consumer prices next year to 4 percent, state television reported on Dec. 14.

http://www.bloomberg.com/news/2010-...25-basis-points-in-bid-to-curb-inflation.html

They are reluctantly fiddling with miniscule doses of Chinese medicine. 0.25%? Pffft. Classic Catch-22 situation. The flood of money into China has given them wealth beyond imagination - but it is a double-edged sword that will smite them hard if they don't curb their binge drinking of too much Capitalist Fizzy Pop.

It appears interest rates world wide next year (and beyond?) are only going to go one way. As a result, I suspect many economies already screaming out in deep debt are going to start going backwards even faster as the interest repayment bills soar.

Australia will NOT be immune from this.

IMO

Happy New Year?

xenith69 · 26 December 2010

great time to be in gold then?

Miner · 26 December 2010

satanoperca said:
Must return to backtesting of shorting systems for the future that lies ahead.

May 2011 be a great year for all.

Satanoperca

greetings for a Happier New Year.
Your shuttle comment on GFC 2 coming is very much frightening. Personally I can only worried the Satan to arrive and can do nothin.
But I am interested to learn your thoughts and readings/analysis to support this wisdom statement . I hate to see you to be right but in this ASF thread there have been excellent comments which should not be discarded. I am treating your one as a valuable and seeking more information.

GumbyLearner · 26 December 2010

GumbyLearner said:
The most populous US states unemployment insurance schemes with some of the highest rates of unemployment are bankrupt.

GumbyLearner · 26 December 2010

The Wall Street Money Machine

http://www.propublica.org/series/the-wall-street-money-machine

Uncle Festivus · 3 January 2011

“And so, you know, we’ve just got to juice this, and pump it up, and get it going faster, but that’s clearly the direction that we’re headed.”

Austan Goolsbee, chairman of the U.S. Council of Economic Advisers, said if Congress fails to raise the debt ceiling, the “impact on the economy would be catastrophic.”
“I don’t see why anybody’s playing chicken with the debt ceiling,” Goolsbee said today on ABC’s “This Week” program. “If we get to the point where we damage the full faith and credit of the United States, that would be the first default in history caused purely by insanity.”

The government is slated to hit the legal limit on borrowing, $14.3 trillion, early this year. Congress must agree to raise that ceiling or the U.S. could be forced to default on its obligations.

A shrill cry of desperation as polititians again ponder whether to raise the US debt ceiling to somewhere like $16TRILLION, and the consequences of not raising it. But they have little choice but to continue the Ponzi scheme.

The U.S. debt will top $13.6 trillion this year and climb to an estimated $19.6 trillion by 2015, according to a Treasury Department report to Congress.
The report that was sent to lawmakers Friday night with no fanfare said the ratio of debt to the gross domestic product would rise to 102 percent by 2015 from 93 percent this year.

2015! Only 4 years away? Mr Market has not priced that one in yet?

Maybe the 'leaders' have a grand plan? Still, plenty of time to act??

Bernanke talked about the need for U.S. leaders to take control of the nation’s deficits over the medium term, some three to six years from now, in a way “that will allow us to bring our fiscal house in order over a long period of time.”

But when asked if the nation has such a plan, or if he’s seen one, Bernanke said: “No. Not yet. I don’t.”

The theme for 2011 continues previous themes - DEBT, Deficits & defaults.......will the REAL GFC stand up?

Fancy Number Machine

Garpal Gumnut · 18 January 2011

From today's Wall St. Journal a warning about an imminent correction, a big one.

The VIX presaged the 2007 correction. Low volumes and disinterested investors indicate little strength in the recent bull run.

gg

Even the optimism of investors””and their complacency about the market's current run””are sell signals, according to some technical analysts. The Chicago Board Options Exchange's Volatility Index, the "fear gauge" known as the VIX, closed on Friday at 15.46, lower than in April and near its lowest level in three years. The VIX has fallen 34.3% since the beginning of the rally in late November.

The American Association of Individual Investors' weekly survey has registered above-average bullishness for 19 straight weeks, the longest such stretch since 2004. For years, some investors have looked to the AAII survey as a compelling contrarian signal. An ebullient reading often is a clue that the market is due for a fall.

The VIX can be a contrary indicator, too, reflecting the prices investors are willing to pay for portfolio insurance on the S&P 500. The VIX tends to drop when stocks rise and investors grow less anxious. The last two times the VIX was trading around these levels, the market headed for a tumble””once in April during the Greek debt crisis, and before that in the fall of 2007, just ahead of the subprime crisis woes.

"The ultimate high tick [on the stock market] usually comes when hardly anyone cares, and our client base is the least engaged in the market as I've ever seen," says Christopher W. Dieterich, technical trading strategist at FBN Securities. "They're monitoring it, but they don't seem to be terribly involved. That's usually how a top feels."

Uncle Festivus · 19 January 2011

It doesn't really mean much, along with several other overbought indicators, so long as share prices are rising GG?

I guess that's what $600 BILLION buys you these days

Smells like a top, looks like a top, but we won't know till it goes POP!

The market is rallying "as if propelled by some mysterious force," says Mark Arbeter, the lead technical analyst for Standard & Poor's, who reckons the market is showing signs of fatigue for the first time in nine months. A stumble could claw back about half of the S&P 500's four-month, 23% rally, he says.

Mysterious Force = US Fed...............

Garpal Gumnut · 19 January 2011

Uncle Festivus said:
It doesn't really mean much, along with several other overbought indicators, so long as share prices are rising GG?

I guess that's what $600 BILLION buys you these days

Smells like a top, looks like a top, but we won't know till it goes POP!

Mysterious Force = US Fed...............

View attachment 40926

As my old mate Joh, used say if it looks like a chook, walks like one, and looks like one,it is a chook.

All the mugs are in.

This has to be a top.

gg

So_Cynical · 19 January 2011

Uncle Festivus said:
Smells like a top, looks like a top, but we won't know till it goes POP!

Uncle F .. im not much for advanced chart reading, but aren't the smaller candles (over the last few months) a sign of exhaustion.?

Garpal Gumnut · 19 January 2011

So_Cynical said:
Uncle F .. im not much for advanced chart reading, but aren't the smaller candles (over the last few months) a sign of exhaustion.?

check with Uncle, but it is.

gg

chrislp · 19 January 2011

So_Cynical said:
Uncle F .. im not much for advanced chart reading, but aren't the smaller candles (over the last few months) a sign of exhaustion.?

The chart your'e referring to is in logarithmic scale that is why the candles look so much smaller.

drsmith · 19 January 2011

To me, the primary considerations are the stability of chinese economic growth or the impact of inflation on the bond market and asset prices generally.

satanoperca · 19 January 2011

Agree with the last few posts, but one must also consider the unprecidented amount of freshly printed $US notes flooding the market that my alter ones analysis of reading charts.

Cheers

Imminent and severe market correction

Uncle Festivus

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