If you read my column on September 19, you will recall that the first of my “red dates” to be on crash alert came up yesterday. No, not kidding. Go here and scroll down to the box and you will see I called it to the day.
Not bad for a crazy man of the woods in East Texas and we seem to get these things right often-enough that our Peoplenomics.com reports have an amazing reputation as the highest benefit/cost among newsletters out there.
But enough. The “red day” yesterday was a nice hit, but it was nowhere near large enough to be considered a Big Crash. When we get to the end of next week? Well, that would be a different kettle of fish.
Since our next “hot date” falls on a weekend (the 9th of October is a week from Sunday) our sense is the markets may drop a bit going into the weekend. Maybe turn up Monday or Tuesday for a sissified weak-sister of a rally attempt, but that should fail Thursday or next week and then we have something like a 100 point decline on Thursday-Friday of next week and then the odds of a Black Monday on Octobrer 10 seem to be rising.
This is not to make nervous forecasts to be parting air. The wise investor knows that playing the market is very much like playing slot machines in a casino. As I have told you many times, the reason I make money (generally, not a lot but certain tip money for our adventures) has nothing to do with skill at slots, but rather having a great sense of money management.
When I have a good hit on a slot machine – like $333 bucks at one stop on our Big Trip this year – the first thing I do is cash out and buy Elaine an “adult beverage.”
My friend J.B. Slear (http://fortwealth.com/) triggered my serious study of money management five years, or so, back when he encouraged me to “…always send a little home…” even when a decent hit was scored.
This market, zooming out a bit, has been in rally mode basically since April of 2009. It has been one hell of a run.
The problem (and it’s one that anyone with a retirement account has to worry about) is where do you switch funds now?
Banks are paying nothing.
Real estate looks to my jaundiced eye like the larger bounce from the lows is about over and that could go down again. Metals seem like they should be screaming, but no one has money to buy with right now.
As I explained in a recent Peoplenomics report: Look at the debt load on people: Between college which is rarely dischargeable debt, even with the Brunner test for bankruptcy, and with credit card debt, only about one-third of young people are debt-free by age 18, or so.
Everyone is debt-saturated so we don’t have the money that would normally drive recovery. While Donald Trump’s plan for a tax break will swell the Federal Debt more than he’s projecting (we’re at a different place in the Long Wave cycle than under Reagan, which was the last time this was done) we still know that deficit spending on the order of 1.5 to 2 percent of GDP is required to really get a turn.
But that was before everyone had debt.
Strap on an explosive vest of un-dischargeable student loans and light the fuse on $20,000 of credit card debt, and let’s toss in a $15,000 car loan…and you can begin to see how even with no taxes, there’s not enough indebtedness wiggle room to finance more than a cheeseburger.
Does the term “We are Soooo Screwed…” sound familiar?
It’s OK. Even with good astrology on his side, Donald Trump would do little more than fill the historical replay of the Herbert Hoover presidency from 1928. Once the roller coaster goes over (and Deutsche Bank is just one roller coaster) then it’s all over until the cars fly off the tracks from going up too high on the coaster.
Humans never learn, at least at the herd/emotional/me me me level. For the rest of us? There’s the stuff called economic history.
A year and a half back I asked an important rhetorical question: “How will you feel as an American being told by our leaders that You will be Bailing out a Foreign Bank?”
I think’s still a great question to be asking. And in the meantime, it may not be Deutsche Bank that drives us off the cliff. In 1974 it was an unheard-of Herstatt Bankhaus that nearly brought down the world, resulting in the instant invention of continuous settlement of derivatives.
But what the textbooks don’t asterisk out is this:
***Until SOMETHING ELSE BREAKS.
So we will keep our eyes open for that in the coming month or six.
More on the dynamics (and more on the problems ahead for defined pension benefit plans) in tomorrow’s Peoplenomics.com report. And no, that kind of content doesn’t show up here on the free side.
Shamelessly, I’m a capitalist, too, you know. (Most don’t give away 80% free like we do, but that’s how karma is balanced.)
DB’s PR Efforts
From the press releases at DB this morning:
You will have seen speculation in the media that a few of our hedge fund clients have reduced some activities with us. That is causing unjustified concerns. We should consider this in the context of the bigger picture: Deutsche Bank overall has more than 20 million clients.
I understand if you feel concerned by the extensive coverage on this issue. Our bank has become subject to speculation. Ongoing rumours are causing significant swings in our stock price.
It is our task now to prevent distorted perception from further interrupting our daily business. Trust is the foundation of banking. Some forces in the markets are currently trying to damage this trust.
Deutsche Bank has strong fundamentals. Let me mention some of the most important facts at this point:
1. We fulfil all current capital requirements and our restructuring is well on track. We completed the disposal of the British insurer Abbey Life this week and the sale of our stake in the Chinese Hua Xia Bank will be finalised soon. This will further improve our capital ratio.
2. We have significantly decreased our market and credit risk in recent years. At no point in the last two decades has the balance sheet of Deutsche Bank been as stable as it is today.
3. Despite low interest rates and a difficult environment we posted a pre-tax profit of about 1 billion euros in the first half of 2016. Before extraordinary items like restructuring costs, we earned about 1.7 billion euros. This demonstrates the operating strength of Deutsche Bank.
4. In a situation like this, the most important factor is our liquidity reserves. Currently they still amount to more than 215 billion euros. This is an extremely comfortable buffer. This is clear proof of how conservatively we have planned. This is acknowledged by numerous banking analysts.
There is therefore no basis for this speculation. Nor can uncertainty about the outcome of our litigation cases in the US explain this pressure on our stock price, if we take the settlements of our peers as a benchmark.
You have all done a tremendous job over the past few days. You are the ones who are in constant contact with our clients and making it clear how Deutsche Bank is really doing. You are Deutsche Bank – that is impressively clear. All of us in the Management Board highly appreciate it.
You will hear back from me soon. Please keep working as you have been doing so far. We are and we remain a strong Deutsche Bank.
John Cryan (CEO DB-g)
That is good communication.
In our view, the biggest risks to systemic stability will arise when the words “bank run” start to appear in news stores in the terribly inept Mainstream Media.
The Google News search for “bank run” is already picking up some traffic.
All way have now it to watch meme propagation speed to see a) what the herd heard and b) which way the herd heads.
Cash and Treasuries are mighty comforting things in here.
Come to think of it, so’s that short position I got into three weeks ago. But better before than after what our data hints could be “Floptober.”
Making Up Money Dept.
Last Fed Money Creation data:
So: Making up money to ensure Hillary, or making up money to stave off deflationary collapse, or….
Personal Income and Expenditures
Let’s take a break and read a fairytale, shall we?
Personal income and expenditures have been released by the Bureau of Economic Analysis:
“Personal income increased $39.3 billion (0.2 percent) in August according to estimates released today by the Bureau of Economic Analysis. Disposable personal income (DPI) increased $31.9 billion (0.2 percent) and personal consumption expenditures (PCE) increased $6.2 billion (less than 0.1 percent).
Real DPI increased 0.1 percent in August and Real PCE decreased 0.1 percent. The PCE price index increased 0.1 percent. Excluding food and energy, the PCE price index increased 0.2 percent.”
Disposable Personal Income (in 2009 dollars) was revised down which is why you can’t buy a Gulfstream.
“Personal saving was $807.6 billion in August and the personal saving rate, personal saving as a percentage of disposable personal income, was 5.7 percent.”
Yes, and I’m the Pope.
We’re a little skeptical of this, needless to say. Doesn’t seemed to have moved markets much, either. Futures are trying to hold even…
Gotta wonder how much that is costing the Plunge Protection Team/Economic Stabilization Fund’s Working Group on Financial Markets?
Naw, too early for them to be in solid, yet.
Answer Me This:
Why does our government have a website called https://uscurrency.gov/?
Seems to me counterfeiting may be an increasing problem and they are looking for ways to “expire more money” over time. Salt away a bunch of hundreds in the 1990’s?
This is why we have reduced debt rather than trying to pile up paper.
Miserable Foreign Pricks Dept.
Suppose it had to come to this: Globalists making their full court press: “UN news agency scrubs tweet calling on Americans abroad to ‘end Trump’.”
We may make bad choices, but when foreign pricks start interjecting themselves I get pissed.
Fact is, we can’t blame them. Our Nobel Peace Prize fraud went and stuck his nose in BREXIT and the bought the nasty nest of neocon’s “regime change crap” so can’t say we can blame them.
Still, major league pisser.
Solar Flare Up
Remnants should arrive today. Lights out and servers down? We’ll see. Doubt it, but I was wrong once…