Financial topics

[vincecate]

The cycle I have "on watch" is the 1293 day cycle.

The time between the Chernobyl accident (April 26, 1986) and the fall of the Berlin Wall (November 9, 1989) is 1293 days. The time between Hurricane Katrina (August 28, 2005) and the bottom of the stock market crash (March 6, 2009) is 1285 days. These events represented the results of a "loss of faith" in the government to properly respond to a crisis.

We are now witnessing a similar failure to respond in Japan. The Fukushima accident occurred on March 11, 2011. 1293 days from March 11, 2011 is September 24, 2014. I am "on watch" for a collapse of the Japanese government around that time period, which will likely in my opinion be the catalyst for the worldwide financial crisis.

This is very interesting. To me it looks like Japan has done everything they could to get hyperinflation and I am surprised it is taking so long. Maybe it will take till Sept.

[Higgenbotham]

This is very interesting. To me it looks like Japan has done everything they could to get hyperinflation and I am surprised it is taking so long. Maybe it will take till Sept.

Not sure how it'll go but a collapse of the Japanese government bond market that turns into a full blown crisis in September wouldn't be surprising. It's hard to imagine how a major Western country can exist without a functioning bond market.

[Higgenbotham]

I am not short yet and will accept a slow drain wave effect.

That's the way most successful speculators operate in general, and it's the way virtually all speculators will be operating in this specific case, due to how this has come about. Statistically, if the ES futures do 1 million in volume the day of the top of the market probably less than 50,000 of that is within a point of the top. At the December 31 top it was probably less than that. Of those that sold up there, probably well over 50% were longs getting out. Most of the remainder were probably hedging long positions. Most of the rest of those were probably scalpers who will be out with a small gain. The same dynamic will probably apply for the first 100 points of the bear market, whenever it comes. As you know, I've vowed not to change my ways and could well be the only speculator left in the world who has not changed. I sold a point under the December 31 top and have picked up about 22 points in gains since then by moving in and out. And now am standing pat. Trying to sell this top will not be a winning proposition unless I can hang on for hundreds of S&P points to regain all my losses. I sold a point under the April 2010 top also thinking that would be the end. And just a few points under the May 2011 top. On the other hand there have been 10 or 15 times besides these 3 instances where I was sure this bull market was at the end and got short there too. And all of the gains that were made in the few instances I was right were lost and then some. Normally I see one top in any given market and that is all.

I think this is telling us that there will be no naked shorts to speak of within 100 points of the top of this market, whenever it comes. Naked shorts are the folks who buy when the market declines and help to support the market. When this thing goes into free fall they won't be there to cover. Instead, they will be sidelined and wanting to get in, which will make the free fall worse. And I don't think they're going to be able to get in. They will blink and it will be gone, down 10, 20, 50 points, no volume and air pockets everywhere. And if I had to guess it may well happen at 4 am while most everyone is sleeping. People will wake up to find out that Goldman's automated computers got it all. This is one reason why crashes like 1929 happen and why I believe this can be the worst crash ever. When the ding dongs in government go looking for all the mythical shorts after the crash in order to find scapegoats they're not going to be able to find any.

[Higgenbotham]

I was talking to a guy who used to work margins for one of the big futures brokers. Asked him what happened during the flash crash and if people who had placed stops were able to get out. He said no, not in all instances. He said the way a stop works in the futures contracts (ES in particular he was talking about) is that the stop becomes a market order when the price is hit, as we all know. He said that if the market hits an air pocket and doesn't trade within 3 points or less of the stop, the stop doesn't get executed. So say the stop is at 1600, the market hits 1601 and goes into free fall on low volume and the next trade is 1596 and then on down. The stop doesn't get executed. Likewise, if the market goes into free fall and potential shorts have sell stops in, they won't get executed either if the market hits air pockets and skips over them by more than 3 points. The other and more likely possibility is that there might be 100 stops in at say 1600. The market may trade between 1600 and 1597 but if the order is queued at say 80 in line and only 50 trade in that range then it doesn't get executed.

All stop markets have protection limits from the CME. For example...ES 3 points...

http://www.ctsfutures.com/downloads/T4% ... 20Misc.pdf

This is exactly what I was told.

[Higgenbotham]

Did Goldman Just Kill The Music? - "The S&P500 Is Now Overvalued By Almost Any Measure"
01/11/2014 12:46

http://www.zerohedge.com/news/2014-01-1 ... ny-measure

Late last night the music may have just skipped a major beat after Goldman released a Friday evening note that is perhaps the most bearish thing to come out of Goldman's chief strategist David Kostin in over a year...

The current valuation of the S&P 500 is lofty by almost any measure, both for the aggregate market as well as the median stock: (1) The P/E ratio; (2) the current P/E expansion cycle; (3) EV/Sales; (4) EV/EBITDA; (5) Free Cash Flow yield; (6) Price/Book as well as the ROE and P/B relationship; and compared with the levels of (6) inflation; (7) nominal 10-year Treasury yields; and (8) real interest rates. Furthermore, the cyclically-adjusted P/E ratio suggests the S&P 500 is currently 30% overvalued in terms of (9) Operating EPS and (10) about 45% overvalued using As Reported earnings.

Reflecting on our recent client visits and conversations, the biggest surprise is how many investors expect the forward P/E multiple to expand to 17x or 18x. For some reason, many market participants believe the P/E multiple has a long-term average of 15x and therefore expansion to 17-18x seems reasonable. But the common perception is wrong. The forward P/E ratio for the S&P 500 during the past 5-year, 10-year, and 35- year periods has averaged 13.2x, 14.1x, and 13.0x, respectively. At 15.9x, the current aggregate forward P/E multiple is high by historical standards.

Most investors are surprised to learn that since 1976 the S&P 500 P/E multiple has only exceeded 17x during the 1997-2000 Tech Bubble and a brief four-month period in 2003-04 (see Exhibit 1). Other than those two episodes, the US stock market has never traded at a P/E of 17x or above.

[aedens]

In 2010, the U.S. Securities and Exchange Commission (SEC) significantly reformed Rule 2a-7, a regulation governing money market funds. Among other requirements, these reforms required money market funds to hold significant liquidity and imposed stricter maturity limits.

Higg I clearly understand your thought map and the often mentioned margin crews that have set up shop.
Can it be buffered, well I get the reg t issue clear enough on settled acounts timelines.
Have I set up long positions? If you consider the first thing when you get up in the morning other than
kissing your wife and reaching for the light switch that is the accounts as mentioned long ago that
yes positions will be defended. Like we noted early we assumed this winter from data many dismissed
and since every rock tossed out of the garden is Plymouth rock Americans are not thinking clear.
I see FEMA went to the aid of another desease cluster and I pray it is not so. This is good since service to the public
is there only right sized function. As for the Tainter effect we know here clearly we can peel that ethical onion also with ease.
As my wifes culture is, they choose who and why and the guys are lucky to have actual thinking Women on many real topics.
She gave up working at the college for family and takes her mother to the garden now to help others think.
Mom survived a stroke in his mercy and quick actions from many and will be in the garden hopefully the spring with Her to help others.
Can we build local and out is the true question since we know the designs from GATT on up.
As you know I have been selling into reality with different models and baskets as we have observed
also here for a rather long time now. Will it matter? I think we know the answer to that here already
why and how there are two balance sheets and both are important concepts when the answers to be simple from
1937 and presented the cold facts to speculation and churning of account statuses. Moral hazard is a bottom up problem
also. To covet cover the realms of fact since policy I think is somewhat focused on the middle being taken from for many levels of
hidden taxes weighing us down as trust is fragmented.

[aedens]

http://www.zerohedge.com/news/2014-01-1 ... hout-fight

What we noted is never missed either

[Higgenbotham]

Higg I clearly understand your thought map.

Cutting through all the weekend discussions and speculations, I'm keeping at this for one reason only. I've been trading long enough that if they can move the market up less than 10% per year I can short and keep ahead of them. Up until late 2011 I was still ahead of them. Last year they moved it 26% and there's no way I can keep ahead of that. Today even the optimists don't think the stock market has more than 10% per year left in it. I'm gambling that they are right. As long as they are, I'll be OK. On the other hand I would not recommend that someone get involved with the markets who has never been involved before just on the basis of it being overvalued. This game has never been more more treacherous and difficult from the standpoint of execution of trades, risk of loss of funds or any other factor I can think of.

[aedens]

I mentioned three windows Higg to be clear and one is here as we know.
Not our call right now. Best move is none on my part for a few days.

sign of the season at hand http://www.kake.com/home/headlines/UPDA ... 78831.html

[Higgenbotham]

I mentioned three windows Higg to be clear and one is here as we know.

http://talkdigitalnetwork.com/2014/01/s ... op-likely/

a, I just listened to this interview and he mentions the variables and historical references according to some of our analysis; in other words, the 1937 and 1973 time periods, the interest rate movements, and the time lags. His conclusion is the high is being made now and his two windows were late November and late December, as were mine plus I still have January 15 or 16 open as a possible high, but looking less likely. He mentions waiting for confirmation of a lower high and lower low on the weekly bar or for 1772 on the S&P to get taken out to confirm a top. My inclination, rather than look for 1800 (my number) or 1772 to get started, since they are 42 plus points away has been to start with 25% and perhaps move to 50% before that happens, trying to take advantage of fluctuations. On the upside I had been seeing 1904-1908 as very strong and will risk that possibility and try to mitigate as best I can if it moves in that direction. If it does get there, it may take about 7-8 weeks so the movement should be manageable.