Financial topics

[Higgenbotham]

a, love the cartoon. It sums up what I've been saying in 10,000 words. In an agricultural economy, the serfs will keep producing food no matter how much abuse the government throws at them because they have to eat. In an industrial economy, the business owners will shut down and lock the doors under similar conditions of government abuse. As we go forward, the government will strip away the entire layer of industrialized economy and force everyone to tend their own kitchen garden to survive. These guys like Obama think busineses profits are like genies that come out of bottles. They have no idea. Look at the guy, just look at him, and think about what you're looking at and what his life experience is. He's an idiot.

This reminds me a lot of the period around mid February 2011. People are projecting highs for the stock market while it continues to melt up. So far I've seen January 4, 11, 16, 18, and 22 mentioned as possible highs. I'm still 100% short and have nothing left in terms of historical projections for where this market might top. That's the same thing I said in February 2011, when I wrote the below on February 6, 12 days before the February 18, 2011 high. This is part of it.

"I calculated a last wall of cycle and anniversary dates that the stock market should not run past. The anniversary dates are: February 3, 1637 was the top of the Tulip Mania 374 years ago and February 9, 1966 was the top of the 1932 to 1966 bull market 45 years ago. 374 and 45 are somewhat significant from a cyclical standpoint. In addition, I calculated a last wall of prices that the market should not exceed by historical standards and they are: 11,918 on the Dow and 1307 on the S&P futures. The 1307 number was mentioned a few months ago. The Dow closed over 12,000 this week and the S&P futures traded 1308.50 on Friday morning. Given the poor fundamental nature of the economy, I doubted these numbers could be challenged, but they were (at a cost of trillions to the taxpayers, in theory). Reading the stock market news, these are once again heady days in America. Unemployment is down, wages are up, the service economy is improving and the Dow has closed over 12,000 this week. Is this April 1930 all over again? My guess is yes, it is. We have arrived."

Looking at my psychology and feeling similar today to when that post was made almost 2 years ago, there are probably 1-2 weeks left for stocks to run. I think the next date in the decaying series mentioned is January 30. In 2007, at the all time high, the stock market stopped short of the similar point, but I feel that this market has room for one last hurrah before we begin the collapse into the dark age. It has to go to a greater extreme of false optimism to get to a greater depth of despair.

[Reality Check]

Odd you believe

I believe it because you repeat DNC talking points that you are smart enough to realize are pure fiction.

I believe it because you cite historical debt levels and then claim current debt levels are within the norm.

I give you the benefit of the doubt and believe that you are smart enough not to drink the Koo-laid you are offering up to others.

[Higgenbotham]

I just finished getting the advice of a Boomer with 40 years experience on Wall Street who has been an independent trader for about 20 of those years. I pay to have access to his opinion, so we are not talking about off the cuff free advice here.

He is the only other person besides me that I know who is short. He started scaling in when I did my last shorts a week ago. Nobody else I know wants to touch this thing.

I told him about the February 2011 comparison. He went back and checked his indicators and said there's nearly an exact match between Friday February 18, 2011 and Friday January 18, 2013. I asked him if there would be a closer match at anytime in the past 7 years and he said probably not. I gave him a couple other dates to check and he said not even close. He asked me to find what news triggered the drop on February 22. He said he felt that news was not significant and the market was just ready to drop. I asked him if the market does drop next week, if it might come back to a higher high on January 30. His opinion was no. His overall opinion after answering my questions was that he is even more confident that the market is ready to drop. He doesn't think it will go up another 1-2 weeks. Just one opinion and it can be wrong. He runs 2 accounts that are tracked by an independent tracking service and they are up 3 fold in 2 years.

I think most people, including myself, don't learn from their mistakes in judgement and keep making the same mistakes over and over. If the market really does drop next week that will show I've modified my behavior slightly as a result of past mistakes. We shall see.

[Higgenbotham]

http://www.consensus-inc.com/002001i/kn ... c-pesc.htm

Another one taking a stab at it. He's been at this for decades and is no lightweight. I noticed some of his analysis was similar to what I posted here. My preference was to project from the lows. He projects from the 1937 high. It does give a cleaner result.

[Higgenbotham]

I just found some old notes from 2007. The analyst who made the projection in the link at the post above called the July 2007 top to within 3 days, according to my notes. After that, the S&P fell about 200 points, then came up to the final October 2007 high, which was about 20 points over the July high. Close enough.

[Reality Check]

"
...

I still can't get used to this. It was perfectly obvious to me by 2004 that there was a housing bubble and a stock market bubble. It was also obvious to Alan Greenspan, who gave some alarming speeches on the subject in 2005. (See "Ben S. Bernanke: The man without agony" from 2005.) And I'm not blessed with any special powers, but I do understand the Law of Mean Reversion, which is taught in Economics 1.01, and when you apply the Law of Mean Reversion, you could see well before 2007 that there was a housing bubble, a stock market bubble and a credit bubble, and that there was going to be a crash. So I was able to apply Economics 1.01 and predict what was going to happen, but Ben Bernanke and the gang at the Fed were totally unable to do the same thing.

These are the same people that are running the Fed today. They still don't have a clue what's going on.

...

This is a level of incompetence that appears to be outside Generation Dynamics Theory.

This appears to be more of a societal incompetence in how we educate our children and our college graduates.

I sometimes speculate that it is because for too many generations the families that raised these people have been away from the farms, mines and factories that teach the lesson's of life, death and productivity on a daily basis.

But, this is just one example, and there are many others, that simply defy conventional explanation, regardless of the politics driving policy.

[Higgenbotham]

Bernanke said this last week at the U. of Michigan in response to the question:

Do you believe that the Fed should actively prevent future asset bubbles and if so what tools do you have to do that?

Notice that he didn't answer the question and won't admit that he is colluding with the banks to create bubbles.

Well, asset bubbles have been--they're very, very difficult to anticipate, obviously. But we can do some things. First of all, we can try to strengthen our financial system, say, by increase--as I mentioned earlier, by increasing the amount of capital liquidity the banks hold, by improving the supervision of those banks, by making sure that every important financial institution is supervised by somebody. There were some very important ones during the crisis that essentially had no effective supervision. So you make the system stronger that if a bubble or some other financial problem emerges, the system will be better able to be more resilient, will be better able to survive the problem. Now, you can try to identify bubbles and I think there has been a lot of research on that, a lot of thinking about that. We have created a council called the Financial Stability Oversight Council, the FSOC, which is made up of 10 regulators and chaired by the Secretary of the Treasury. One of whose responsibilities is to monitor the financial system as the Fed also does and try to identify problems that emerge. So, you're not going to identify every possible problem for sure but you can do your best and you can try to make sure that the system is strong. And when you identify problems, you can use--I think the first line of defense needs to be regulatory and supervisory authorities that not only the Fed but other organizations like the OCC and the FDIC and so on have as well. So you can address these problems using regulatory and supervisory authorities. Now having said all that, as I was saying earlier, there's a lot of disagreement about what role monetary policy plays in creating asset bubbles. It is not a settled issue. There are some people who think that it's an important source of asset bubbles, others would think, it's not. Our attitude is, that we need to be open-minded about it and to pay close attention to what's happening and to the extent that we can identify problems. You know, we need to address that. The Federal Reserve was created in about 100 years ago now, 1930 was the law, not to do monetary policy but rather to address financial panics. And that's what we did, of course, in 2008 and 2009. And it's a difficult task but I think going forward, the Fed needs to think about financial stability and monetary economics stability as being, in some sense, the two key pillars of what the Central Bank tries to do. And so we will, obviously, be working very hard in financial stability. We'll be using our regulatory and supervisory powers. We'll try to strengthen the financial system. And if necessary, we will adjust monetary policy as well but I don't think that's the first line of defense.

http://www.fordschool.umich.edu/events/calendar/1447/

[aedens]

http://www.zerohedge.com/news/2013-01-2 ... rtsContext:

[aedens]

I noted 15 calendar days difference to the wave leg. I still consider the offsets to retail as was when the second margin call wiped out the first survivors raft back then. With the kill switches flipped already did the margin get the message? Either way, these convergances are not confirmation bias. One more
push started on this dialog some time ago. Thought view: as the Dow peaked in early 1937 and bottomed out in April 1938. I do not expect that much of a blow out yet.

[Higgenbotham]

John, you will love these Will Rogers quotes. Holy Crap!

http://en.wikipedia.org/wiki/Will_Roger ... one-liners

Here's a sample which, according to the footnote, looks to be 1928.

"The average citizen knows only too well that it makes no difference to him which side wins. He realizes that the Republican elephant and the Democratic donkey have come to resemble each other so closely that it is practically impossible to tell them apart; both of them make the same braying noise, and neither of them ever says anything. The only perceptible difference is that the elephant is somewhat the larger of the two."

http://en.wikipedia.org/wiki/Will_Roger ... gn.2C_1928