Futures are up 30, oil over $52.50…
Not to put too find a point on this being a replay of the Roaring Twenties, the end of which was overseen by president Hoover, but here we are with markets setting new highs and the future ahead looks…well…problematic is a polite term for it.
Just as the original Roaring Twenties ran from the end of the 1921 market break up through the September 3 peak in ‘29, an astounding eight-year run, the current run should also end in about 8-9 years which means by this fall, but more likely next year’s fall, we should be seeing economic reality set in.
And there are other indicators, as well. But since this is a shortened work-week, here’s the picture I drew for Peoplenomics readers a couple of months back:
The key thing I look for are the ratios. For example, we know that the run-up from 2009 to present has been a factor of (roughly) 2.72 times.
Now, let’s look at the chart above: Where would 2.71 times the 1921 low have placed the Dow back when?
The answer would be (63.9 x 2.72) =173. 78.
Given that my chart here is a couple of months old, we can see we’re in the period just ahead of what should be a screaming rally in stocks that could last another year, and maybe till the closing hours of the Obama presidency.
Then, we would slip into the soup of Paul Krugman has described in his book titled The Great Unraveling: Losing Our Way in the New Century (Updated and Expanded).
Still, for now, it’s not exactly secret that our Trading Model has been mostly long since 2009 and keeping an eye on the longer-term rhymes is where we can find ancestral evidence of market bubbles going to such extremes: From the 1921 break’s low, the Dow rallied to 5.96 times that value before breaking.
If we then look at 2009 and use a starting level of 6627 and apply this kind of wild blow-off excess, we could actually make a case for a Dow 39,500.
Yeah, sure, there is fear (and a lot of loathing) whipped up by the rabid right radio rhetoricians (RRRR) but the fact is that the economy doesn’t seem poised for collapse yet, this morning.
I’ll grant you, it’s not likely to play out so smoothly and predictably, but we’ll have some further comments on where smart money might be going in tomorrow’s Peoplenomics report.
In the meantime, Elaine and I are off on our cruise this coming Saturday, so don’t look for really long columns (though quite likely more interesting than usual). But I wanted you to understand why we are taking time to “sail and smell the roses.”
The picture is not nearly so clear today, as it was in the 1930’s blow-off. For one, the impact of inflation was pretty low. In fact, according to the Minneapolis Fed inflation calculator, One Dollar in 1921 was buying about $1.05 worth of goods in 1929.
Using the 2009 low, we see that despite the deflationary picture in general (and given away by the ultra long-term view of the Treasury (^TNX) chart, we still have 10% inflation since 2009. But whether that will be additive, or subtractive relative to the Dow 40,000 target becomes an interesting area for speculation which we’ll save for the subscriber side.
There’s also the coupling effect of the global economy…so a long discussion about whether we’re running on a clock (the time domain) to blow up, or whether it’s a set percentage increase (the dollar/value domain) should be covered on the subscriber side.
CAUTION: Whenever I talk about upside potential, a downside reversal is almost always at hand.
Still, the holiday weekend is over…the world hasn’t ended, although the new generation’s Hitler analog ought to be working his way into power in a country where unemployment is high and nationalism is important, so keep a close eye on challengers to Putin/Medvedev.
Watching Brother Alexei
All of which wouldn’t be worth doing except we have a convenient country with high unemployment, strong nationalism, and frankly, a strong challenger who has already been through his Mein Kampf jail time in the person of Alexei Navalny.
You might remember he, and his brother, was boxed up by the Putanists because of politics and ultranational worries. They seem to be able to read history, like we can.
At any rate, Navalny is back in custody, and with that, calls for another jail term. But history argues that if Navalny is to be the ultranationalist analog, he will beat this rap and will quickly ascend into a position of strong challenger to Putin/Medvedev.
Or, I could be looking in the wrong place.
Muslims Taking Over France
There goes the Louvre off our tourist bucklist with video of how a Jewish journalist was spat on and called names walking the streets of France in clothing indicating his religion.
Meantime, Jews are being called on to return to their homeland is Israel and Billy Graham turns weather forecaster says there’s a storm coming with the latest ISIS beheadings.
See how easily played the liberals of France were? Think there’s a lesson in there somewhere? The road to hell is paved with free lunch promises and a blind eye toward history.
Obama’s Imperial Immigration Loss
A reader might wonder why we didn’t begin first thing this morning with the report that the Obama administration’s executive amnesty program has been halted by a federal judge here in Texas.
The broader context of this might be a reversal of the 1920’s experience. In 1921, the US passed the Quotas Act which limited immigration from Europe, but didn’t start getting serious about immigration from Mexico until the Depression had started to really bite. The Immigration bill of 1924 was the first one to set quotas by country so that should be along soon enough. Arguably, it’s behind schedule. Although if any immigration law is just going to be ignored by the Imperials, then it doesn’t matter, I suppose.
So, in this episode of how the world (re) turns, we would expect to see something similar, except of course for British accented news anchors – which are an insult to any American with half a brain because we have our own J-schools in this country – but seems like there’s a need to kneel and what better way to play than shove foreign news anchors down the throats of the remaining “Melting Pot Holdouts.”
My, ain’t history fun?
Republican Jeff Sessions has put together a timeline of 200 example of how the Obama administration has dismantled laws passed by Congress and seems to me this will lead to a possible impeachment drive, especially since the president has signaled the government won’t stand for the Texas federal court decision.
Whether this is 2016 posturing or defending America from invasion from Mexico I’ll let slide as I’m sure you have an opinion on this already.
Back to Economics
As I mentioned (ever-so-pissed about this) the inflation rate data won’t be out until next week. Which means we will have to suffer through the Empire State Manufacturing Survey which, as expected, is up a smidge. Down but still up, if that makes sense:
The February 2015 Empire State Manufacturing Survey indicates that business activity continued to expand at a modest pace for New York manufacturers. The headline general business conditions index edged down two points to 7.8. The new orders index fell five points to 1.2—evidence that orders were flat—while the shipments index climbed to 14.1.
Tomorrow we’ll have some housing start data, which doesn’t really matter, too much, since this is the seasonal low. It’s now fun building homes in the middle of a tough winter, despite what the Warmists would claim.
As I said yesterday, it’s a national embarrassment that the once 15th like clockwork Consumer Price data isn’t out till late NEXT WEEK. But, thanks to the Obama presidency, my expectations of fast and fair from federal government has already been ratcheted down considerably, so pardon my lack of shock and awe. To busy focused on other issues, like ignoring laws passed by Congress, I suppose.
Still, we pay our taxes and then some. Life’s too short to sweat the small stuff and it’s all small stuff.
Oh…Spring Solstice EarthQuake Season. And we had a six something off Japan and that was followed by this here 5.8 something.
Still, I’m plagued by concern about a 9+ in April, another other than a dream about it, there’s little basis in fact. Except that quake do tell to happen in this period. March 11th was when the big Fukushima Tohoku Quake took place.. And Good Friday of 1964 took place on March 27th.
It doesn’t happen every year, but with enough regularity one begins to wonder whether there’s something special about this time of the year just ahead.
Since good Friday falls on April 3rd this week, and quakes seem to his around major holidays, a 9.0 sometime around Easter in April 5th would be a Great Sign to some, I’m sure.
The Dry ships Baltic Dry Index has collapsed to just 516 this morning, which may be taken as a serious portent of trouble since the last time it was anywhere near (but not) this low was 2009.
Longshoremen are being locked out by the Pacific Maritime employers group so the SecLabor will try to talk some sense into them this week, but odds are the employers will continue the corpmedia union-busting PR stunts.
I’ve got a nickel side bet that a president who can’t close the Mexico border will find some way to bust the chops of Longshoremen…call me cynical, but stay tuned.
Just like Healthcare Reform – the biggest payoff in history to the Insurance Industry, the Obama administration has shown a remarkable ability to seduce voters and then turn pleasant opportunity into date rape.
Yes, it’s just like any other Monday, ain’t it? ‘Cept for it being Tuesday which means only four days of BS this week instead of the usual five-count. Unless you’re one of the invisible people, in which case things are hopeless unless we all vote out every incumbent there is and go strictly non-corporate-owned parties… but you knew that last election, didn’t you?