[Troller]

You can´t predict the markets because they are dependent from central banks actions and secondary measures from governments. And these actions are seemingly random in time. The only thing you can understand is a shift in market sentiment. These shift is palpable by a backturn of central bank policies and in many measures taken by governments which direct or indirectly stifles investment. May it be foreign or national.

Central banks are like fuel on a plane. The moment they raise interest rates they are cutting it´s fuel. The plane will glide for some time but inevitably fall. Other measures from governments. Like raise in tax, regulations, etc. Are storms to help take the plane down.

The recession didn´t happen yet because Trump managed to influence Powell. And he backtracked from the path of rising interest rates. This event you cannot time. You cannot time when political and economical decision makers decide it´s time to raise or lower interest rates.
Even without raising interest rates central banks can difficult access to credit. Setting more regulations or demands of it´s approvals.

Both FED and ECB are privately owned.
If you add other measures like a raise in tax. A regulatory new rule. State persecution of investments. Crashes are more probable. Investments are globally interconnected. Just like a Rubik cube. A measure in China will affect Europe and US. You cut off the oxygen of a source of investment directly in it´s origin. Wether it be China, Europe, Dubai, US, etc. And that area of investment dries up.

Credit is the fuel of the economy. You cut the fuel the engine stops working. When does the fuel gets cut. Nobody knows. The current policy is to start cutting the fuel.

[Kid Twist]

(02-27-2019 12:06 AM)Arado Wrote:  

(02-26-2019 04:10 PM)BetaNoMore Wrote:  

Not trying to be a hater but it seems like to me even despite all the seemingly “smart” analysis in the recent posts, most people just can’t predict the market with any semblance of accuracy.

There were a lot of posts recently talking about the market crashing and if people truly could predict what would happen, they would have made a ton of gains over the past 2 months after the dip the market went through.

Have you actually read the thread? My main point has been that Central Banks have been doing a ton of printing to pump the markets (ECB, BOJ, and markets are now pricing in a Fed cut this year) so we can't actually predict much. It just seems really risky to dump your life savings into an index fund this late in the business cycle - in case the Central Banks want to tighten policy then there will be a major fall.

PEs are nowhere near where they were even in very recent times (dot com bubble --- go check). The local and fed debt crises are coming, but not before world crises of the same ... where are people going to go, the bond markets? LOL

The market can, and will, go MUCH higher.

[Kid Twist]

(02-27-2019 05:57 AM)Troller Wrote:  

Credit is the fuel of the economy. You cut the fuel the engine stops working. When does the fuel gets cut. Nobody knows. The current policy is to start cutting the fuel.

You fail to mention a pretty important thing though: WHY they are "cutting fuel." Powell is a smart guy, and he doesn't want to do intentionally harmful things (I'm not a conspiracy theorist, sorry). So the question remains, that you leave unanswered, why would he cut the fuel? You set up a funny conundrum there, locking yourself into an answer I'm waiting to hear (and chuckling).

[void]

The idea that any government has to pay interest rate on the loans it takes from the central bank is ridiculous. With this policy alone, you create interest debt that can never be paid back and impacts the cashflow of the state. The only fair system is 0% interest, if government wants to pull money out of their economy they can always give it back to the central bank.

[gework]

I can't remember if I posted this before; and it's just a guess, but I though The Fed's policies were geared towards letting some air out of some bubbles. We've seen big falls in overpriced stocks, a decline in high-end real estate and The Fed has been cleaning its balance sheet:

Here's the projection:



Current pull back is on track:



I think they are probably planning on trying to slowly juice everything down and hope they can go back to normal.

I don't think they'll be able to due it.

Global stock market caps are at all time highs again (two years out of date):



Any tips for good things to hold for a crash? I'm mainly looking at leveraged short ETFs.

[CaptainChardonnay]

https://www.cnbc.com/2019/03/04/kyle-bas...-2020.html

Quote:

Hayman Capital's Kyle Bass predicts US interest rates will head back to zero in 2020

Hayman Capital Management founder Kyle Bass expects interest rates will head back to zero in 2020 as the U.S. and the rest of the world enter into an economic recession.

Bass, who said his firm is long bonds, told CNBC's Brian Sullivan that the economic stimulus from President Donald Trump's 2017 tax cuts will wear off toward the end of this year. The lack of fiscal stimulus and resulting economic downturn may force the Federal Reserve, led by Chairman Jerome Powell, to cut interest rates.

The central bank's current policy rate is between 2.25 percent and 2.5 percent.

"Southeast Asia is headed for a recession in 2019. Europe is headed for a recession in 2019," the hedge fund manager said in an interview that aired on "Worldwide Exchange" on Tuesday. "The world is not just going to have a recession and the U.S. is going to keep growing."

Most economists, as well as some the world's business elite, agree that economic growth is slowing and some predict that the global economy is headed for a recession as soon as this year.

Economists see on average a 25 percent chance of a recession within 12 months, according to a Wall Street Journal survey published in January, the highest level since October 2011 and up from just 13 percent last year.

As a result of a recession and lack of fiscal stimulus, Bass also said he expects the U.S. to suffer a "minor" stock pullback in 2020. He did not elaborate on how much he expected stocks to fall.

The market had been under serious pressure since early October in part on concerns about a trade war and the aggressiveness of the Fed's rate-hike policy. Stocks in December plunged in their worst Christmas Eve trading ever, with the S&P 500 sinking 2.7 percent and slipping into a bear market, defined as a decline in an index or asset of 20 percent or more from recent highs.

Since the Dec. 24 close, however, the S&P 500 has rallied 19.25 percent through Friday's close.

Bass made a name for himself in 2007 with a lucrative bet against the subprime mortgage market. He made a huge currency bet in 2016 against the Chinese yuan, predicting it would depreciate by as much as 30 to 40 percent.

[Repo]

(03-05-2019 02:21 PM)gework Wrote:  

I can't remember if I posted this before; and it's just a guess, but I though The Fed's policies were geared towards letting some air out of some bubbles. We've seen big falls in overpriced stocks, a decline in high-end real estate and The Fed has been cleaning its balance sheet:

Here's the projection:



Current pull back is on track:



I think they are probably planning on trying to slowly juice everything down and hope they can go back to normal.

I don't think they'll be able to due it.

Global stock market caps are at all time highs again (two years out of date):



Any tips for good things to hold for a crash? I'm mainly looking at leveraged short ETFs.

I think that first chart is dated. They've already pulled back on the rate of clearing their balance sheet.

[Arado]

(02-28-2019 11:21 PM)Kid Twist Wrote:  

(02-27-2019 12:06 AM)Arado Wrote:  

(02-26-2019 04:10 PM)BetaNoMore Wrote:  

Not trying to be a hater but it seems like to me even despite all the seemingly “smart” analysis in the recent posts, most people just can’t predict the market with any semblance of accuracy.

There were a lot of posts recently talking about the market crashing and if people truly could predict what would happen, they would have made a ton of gains over the past 2 months after the dip the market went through.

Have you actually read the thread? My main point has been that Central Banks have been doing a ton of printing to pump the markets (ECB, BOJ, and markets are now pricing in a Fed cut this year) so we can't actually predict much. It just seems really risky to dump your life savings into an index fund this late in the business cycle - in case the Central Banks want to tighten policy then there will be a major fall.

PEs are nowhere near where they were even in very recent times (dot com bubble --- go check). The local and fed debt crises are coming, but not before world crises of the same ... where are people going to go, the bond markets? LOL

The market can, and will, go MUCH higher.

We're somewhat rehashing old arguments on this, so I'll just repost what I posted earlier. It really depends on what indicators you use, and this is further complicated by unprecedented stimulus from Central Banks towards the end of a business cycle. With more QE and zero interest rates, sure the markets can go higher, but I don't think we will start QE before a significant pullback. The question then becomes whether printing and monetary stimulus in China, Europe, Japan, and UK will be enough to drive US stocks higher (mainly through US companies borrowing money at low interest rates to buy back stock) absent a major reversal from the Fed.

According to these indicators, stocks have only been more overvalued during the dot com bubble (as you mentioned). We are beyond 2008 levels and are nearing 1929 levels of overvaluation.

If the indices can't handle a fed funds rate barely above the inflation rate then how is this a healthy market with significant room to grow?

(01-01-2019 09:55 PM)Arado Wrote:  

This guy is usually pretty balanced, and he notes that the market is tremendously overpriced, making it quite difficult to buy companies at a discounted price. Cyclically adjusted price/earnings ratio is way too high, nearing the all time high and 2x what it usually is. The Wilshire GDP indicator (stock market value to revenue ratio) is also too high. Warren Buffet is heavy on cash.

[Kid Twist]

Bass was also shorting the yen and they still have found ways for that not to work for him. China has its issues, but the realvision guys have all been wrong for over 2 years now, meaning ... they don't know what's going on. Sorry, being early (Mr. Schiff) is wrong, especially when you miss huge runs the opportunity cost is tremendous for you and/or your clients.

You guys all know my prediction, but I think it's fair to be wary into 2020-21. I still do not believe that there will be a big market problem until all the public debt stuff kicks, which is earliest 2020 ...

[Arado]

(03-07-2019 11:40 PM)Kid Twist Wrote:  

Bass was also shorting the yen and they still have found ways for that not to work for him. China has its issues, but the realvision guys have all been wrong for over 2 years now, meaning ... they don't know what's going on. Sorry, being early (Mr. Schiff) is wrong, especially when you miss huge runs the opportunity cost is tremendous for you and/or your clients.

You guys all know my prediction, but I think it's fair to be wary into 2020-21. I still do not believe that there will be a big market problem until all the public debt stuff kicks, which is earliest 2020 ...

Fair enough. I'm still trying to wrap my head around Japan and understand what the hell is going on there.

I feel like we are entering a new market paradigm where the traditional macroeconomic tools, indicators and trends are no longer effective at predicting the future. Peter Schiff is looking at the fundamentals, but who knows, the Central Banks may still have some tricks up their sleeves to juice asset prices and keep the debt bubble from exploding without triggering massive inflation. Seems unfair to people who are responsible savers and just want a decent return above inflation without putting their wealth at risk of a massive decline.

[Kid Twist]

I highly recommended reading Richard Koo.

PE valuations are nowhere near dot com bubble levels, that's not to say that they aren't overvalued (I have no opinion on this currently) but it is to say that the market can go up much, much more.

The thing Schiff gets wrong is that this is a global economy and he doesn't understand that the flight to quality is to the USA. It DOES matter that the USA/FED is in WAY better shape than nearly every other first world equity and bond market, and by a LOT.

Koo also admits that this too shall have an end, and that no one truly knows how to unwind QE = there will be problems, but not necessarily as soon as people are saying, and they've been saying it for a long time.

Note that Trump's election and deregulation, repatriation, etc. just increases the probability that everything will last longer.

As I've said, the mini quake will be when these munis blow up --- that's not that far off for a place like Chicago or Illinois --- they just elected a fatass lefty gov to finish the job, which should be entertaining. We'll see who they choose for Mayor.

[godzilla]

Take a look at the Nikkei 225 chart from 1950-1989. (especially 74-89).This thing could go on for a while before a truly epic crash

[Arado]

(03-09-2019 06:34 PM)godzilla Wrote:  

Take a look at the Nikkei 225 chart from 1950-1989. (especially 74-89).This thing could go on for a while before a truly epic crash

They also were putting up huge GDP growth numbers at that time too (rebuilding capital base after having two nuclear bombs dropped on them certainly juices the numbers) so it's not very relevant for the US situation - there's only so much that the markets can divorce from GDP. Now, the market cap to GDP ratios is quite high. Corporate earnings per share (and consequently stock prices) have been pumped by tax cuts and debt-fueled stock buybacks, which would make P/E ratios appear to be somewhat normal.

This is all fundamentals though. The markets can remain irrational for years while observers keep complaining about debt and overvaluation.

[Genghis Khan]

I've been reading Ray Dalio's new book Big Debt Crises - a very clear explanation of what to expect moving forward (Dalio has said there's a 70% chance of a recession in 2019-2020).

Highly recommend the book.

What I really like about Dalio is that he's actually made billions in the stock market. In that sense, I much rather listen to him that a permabear goldbug like Peter Schiff or some scammy ass dude like Armstrong.

[Jaydublin]

^^ what are his thoughts on how this will affect private as well as public pensions which are all already very underfunded?

[Genghis Khan]

I don't recall him mentioning pension funds specifically in his book

[Kid Twist]

^ In what way is the economy "deeply flawed"?

[Arado]

Yield curve moves closer to inverting following the Fed's capitulation yesterday (link marketwatch). The stock market had a major rally the last few months, and supposedly the economy is humming along, so why are rates stagnating at a pitiful 2-2.5% and why will the Fed keep a bloated balance sheet? Obviously something is wrong and they know that there is too much debt outstanding to tighten monetary policy.

Quote:

Even for a bond market bracing for an accommodative Federal Reserve, policy makers’ moves on Wednesday were a stunner, raising the specter of recession.

In particular, analysts said bond investors were taken aback by the sharp reduction of interest-rate-hike projections by the Federal Open Market Committee to zero from two back in December, as reflected in the central bank’s “dot plot” — a chart of Fed members’ projections for future rates.

On top of that, the Fed announced plans to end the runoff of its $4 trillion balance sheet in September and downgraded expectations for gross domestic product in 2019 to 2.1% from 2.3%.

Although the central bank held key rates at a range between 2.25% to 2.50%, as expected, the combination of other statements delivered a dovish jolt to fixed-income investors.
...
Wednesday’s moves were interpreted as a more pronounced reversal by the Fed, perhaps because just in December, the central bank was penciling in two rate increases in 2019, as per the dot plot. Recent statements raise new fears that the Fed is worried that growth woes swirling abroad may soon wash up on U.S. shores.

Most notably, the spread between the three-month bill TMUBMUSD03M, +0.10% and 10-year Treasury note narrowed to 4 basis points. A so-called yield curve inversion, where the rate of longer-dated debt falls beneath its shorter-dated counterparts, is widely viewed as an accurate recession indicator, and the three-month and 10-year pair is the most closely followed by economists. That spread narrowed further Wednesday, standing a hair’s breadth from a full-blown inversion red flag.

As we have gone back and forth on this many times, if you look at the chart at 2:46, OTHER than during the tech bubble, the current stock market is more overvalued than at any other time in the last hundred years (again, depends on the indicator you use but this one is quite fair). He doesn't advise pulling all your money out of stocks, but does give a reasonable suggestion that if you have debt that has a higher interest rate than the expected return in the stock market (around 5-7% long term given current high valuations), now is the time to pay that off instead of using your cash to further purchase assets.

[jeffreyjerpp]

It's happening:

"The distortion in the yield curve is building with tremendous force. There are vast bids for US 90-day T-Bills from around the world and no offers. The shortage in US government paper is now being reported to us from repo desks around the world. There is a MAJOR PANIC in to the dollar as emerging markets come under a financial crisis, in part, instigated by Turkey. The government simply trapped investors and refuses to allow transactions out of the Turkish lira. Turkey’s stand-off with investors has unnerved traders globally, pushing the world ever closer to a major FINANCIAL PANIC come this May 2019.

There is a major liquidity crisis brewing that could pop in May 2019. European Banks have loaded their portfolios with real estate loans thanks to quantitative easing and negative interest rates, and emerging market debt. Spanish banks are especially invested in Turkish debt where they hoped to get the highest yields expecting that the IMF would never let Turkey default. On top of this, banks have been lending to each other to also avoid parking money at the European Central Bank where they would be charged with a negative interest rate.

Currencies from South Africa’s rand to Brazil’s real are witnessing a spike in their expected volatility, signaling concern they may weaken the most along with the Turkish lira going into May. The price swings have evoked sudden deep-rooted fears that there may be an emerging market crash before the end of the year.

We will update on the private blog in more detail. However, keep in mind that this Inverted Yield Curve is by no means reflecting a US recession. This is a global financial panic unfolding on a grand scale. This is why we selected May for the WEC in Rome. This is far more than just politics. This is beginning to evolve into a serious liquidity crisis where we may yet see more countries try capital controls to save the day."

armstrongeconomics.com/international-news/emerging-markets/the-financial-panic-of-2019/

[Genghis Khan]

In contrast to Armstrong, Ray Dalio was a lot more optimistic this month:

https://www.linkedin.com/pulse/why-were-...ray-dalio/

He's moved from puttings odds of a recession before next presidential election at 70% to 35%.

I like Dalio a lot. I'm mostly posting this here to hold himself (for my own record keeping) accountable on his statements and predictions.

[Kid Twist]

Yes, I believe there is a very, very small chance anything happens to the US in 2019, so I think Dalio is about right when he puts the end date at November 2020.

I'd be buying stocks, and MSFT options play have looked good for a long time, and they still do.

[BetaNoMore]

S&P 500 is up 12.4% so far in 2019. Due to the nature of the market (based on the past), there will no doubt be a crash at some point in time - but when this is, most cannot predict. If people could actually time the market, they would have taken advantage of this rally this year, made huge gains and then get out before the crash happens. Instead, the people who have been predicting a crash have missed out. Even worse, some of these people have been predicting a large crash for the past 5+ years holding onto cash and missing out on all the gains!

Of course, if a crash happens in the next 6 months, the doomsdayers will say "I told you so!" but that isn't a prediction because a broken clock is right twice a day.