Opinions vary... An alternative view on the markets

[CanOz]

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.

 

[kahuna1]

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.

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

 

[CanOz]

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...

 

[kahuna1]

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

 

[kahuna1]

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.pdfView attachment China Syndrome Oct 2013.pdf

 

[kahuna1]

“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

 

[trainspotter]

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.

 

[kahuna1]

“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

 

[kahuna1]

"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

 

[kahuna1]

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

 

[kahuna1]

“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

 

[qldfrog]

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

 

[kahuna1]

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

 

[kahuna1]

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

 

[kahuna1]

“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

 

[kahuna1]

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

 

[Timmy001]

Nice video robusta.

 

[kahuna1]

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 set 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.

 

[kahuna1]

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.

 

[kahuna1]

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.