Halfway to My Blow-Off Forecast?

Anyone with 50-cents of net worth has heard by now that the Federal Reserve left their rates unchanged at the Yellen-session Wednesday.

But this just moves us closer to the point where I will finish ny dollar-cost averaging into the long side of the market for what my (twisted) logic screams MUST be a huge rally in the stock market to come. In fact, it should be along the scale of the 1928-1929 blow-off.

The reason is simple when you think about it: We have been in a decline of bond yields (which has driven their prices up) since 1985, or thereabouts. You can look at the 10-year Treasury note chart here, if you don’t believe it.

What’s more, at some point, this long wave economic decline in bond rates will reverse…and money will flow OUT of bonds and INTO other investments like the stocks that I started to wade into after the Fed decision came out.

This assertion – namely that money flows will begin to move out of stocks – is not blowing smoke: Barron’s had an article hinting in this direction back last month.

Now, fast forward to the aftermath of the Fed decision and what do you see? “Foreign selling of U.S. Treasuries in April was most since 1978: data” is one headline worth some study.

Around the Hallowed Halls of the Economic Crackpot Institute here in East Texas, it’s an article of faith that there is “only so much money in the world.”

When money comes out of one thing (like bonds in this case) it will go into OTHER investments.

My friend Robin Landry says IF this is a fifth wave up that’s about to get rolling, we might see things like oil prices firm, gold prices begin to really take off (bringing silver with them), as well as other things.

My own studies confirm this – and one of the reason’s I have been nattering on about new all-time highs before the presidential election is there is a sort of physical asset drive that would be nicely placed, about here.

My Brother-in-Law and his wife are on the road down to Killeen, Texas this morning. They will be stopping in Temple for some VA appointments, but then off house shopping again. For under $100K, you can get a house that in a frothy market, like Seattle, would be double the price or more. And with the bond market still in denial (the 10-year is down about 1.6%) the stage is set for the bond bunch to sell to doomporn victims who missed the start of the party in 1987…

The “move to other assets” like common stocks, I figure, along with gold, silver, eventually oil, and oh, did you see since we green lighted Bitcoins down around $300, they are up at $737 this morning, and if this really is an Elliott third wave up starting for Bitcoin, an eventual breakout over the $2,000 level seems possible.

The much-touted decline of the US dollar is massively misunderstood, I think, too.

Sure, the dollar will drop in value – which is what happens when a nation is making up money at an 11-12% per year rate.

But something else begins to happen, too: Inflation returns. Oh, sure, monetary inflation, not the healthier wage-driven sort, but hey, what do you think all this $15 per hour minimum wagte talk was about? Come on…stay on page with us.

This is why I am quietly pressing my Bro-In-Law and wife to grab a home at super-low rates while they can. It will be like printing money.

Think of it this way: Say they buy a home for $100,000. That is based on the amount of money in circulation right now.

Fast-forward 5-years: We will have all these immigrants to pay for, there will be complete government intrusion into every aspect of life, the Federal debt will likely go up to somewhere around $20 trillion.

How does it happen? Oh, simple: US bonds return home, the government has to soak them up or collapse the House of Cards, there’s the entitlement monster, baked-in increases for higher ed, more wars… yeah, forget what you read in forecasts, I can make a case for a $30-trillion national debt in 5-6 years.

What does that mean? Well, everything in that world would be 50% more expensive…which is why you want to consider locking prices in while you can for big ticket items like car, truck, home, and medical procedures that you might need in the future.

If the BroInLaw and the Mrs. can pop a zero down $100K home now, and I’m right, then in 6-years, they will have gained $50K in equity.

Sorry, didn’t mean to get off on a rant there, but you can almost smell what’s coming.

And one of the better investments with cheapening dollars will be? (Hint: Won’t be buying bonds) It will be STOCKS.

There, not only do you have the inflation effect on plant and equipment appreciation for big companies, but you also have a Wild West mentality over future prices that should set in within 6-months, but maybe as soon as this summer.

So yes, the market will go down – maybe for another week, but the close this week is loikely a simple fake-out – a buying opportunity for the Big Boys, who will buy now and sell to the late comers in a year or two – when they get long term gains and it’s time for that one-year into a new presidency economic crisis…where it will all be played again.

OK…enough, then. Ure is long the market in here, loves metals, and has been right on Bitcoin since the low 300’s.

What could possibly go wrong?  Just watching the Fed H.6 money stocks reports and sit back and enjoy…love that the futures are down 90…you drop all you want, boys…

Falling purchasing power of dollars means it will take more of them and that will over time hit everything…

Consumer Price Report

Buckle up and read:

“The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.2 percent in May on a seasonally adjusted basis, the U.S. Bureau of Labor Statistics reported today. Over the last 12 months, the all items index rose 1.0 percent before seasonal adjustment.

The food index declined in May, but the indexes for energy and all items less food and energy rose, resulting in the seasonally adjusted all items increase.

The food index fell 0.2 percent, as all six major grocery store food group indexes declined. The energy index increased 1.2 percent as the gasoline index rose 2.3 percent and the indexes for fuel oil and natural gas also advanced.

The index for all items less food and energy increased 0.2 percent in May. The shelter index rose 0.4 percent, and the indexes for medical care, apparel, motor vehicle insurance, and education were among indexes that also increased.

These advances more than offset declines in an array of indexes including used cars and trucks, communications, household furnishings and operations, airline fares, and new vehicles.

The all items index rose 1.0 percent for the 12 months ending May, compared to a 1.1-percent increase for the 12 months ending April. The index for all items less food and energy rose 2.2 percent over the last 12 months. The food index has risen 0.7 percent over the last year, with the index for food at home declining 0.7 percent and the index for food away from home rising 2.6 percent.

The energy index has declined 10.1 percent over the past 12 months, with all major components falling over the span.”

The major number the Fed looks at it All Items Less Food and Energy which is up 2.2% in the last 12-months.

One of the items that really helps the average is that gasoline was down 16% but remember, this was May data and with the summer driving and vacation season here, we look for gas savings to (bad pun alert) evaporate.

Futures down 90…ain’t nothing pleases a worried market.

Getting Reasonable on Guns

Yes, I own a gun or two. Working tools on the ranch. But should someone on the government’s no fly list, or someone on a terrorism watch list be able to freely buy?

A democratic senator has ended a filibuster…but more important, keep an eye on how Donald “Art of the Deal” Trump may be able to broker a reasonable deal with the NRA and congress…and this before the election. I’d contrast that with how many years of…oh, let’s not go there…but high fives us for the effort.

Copycat Crazy?

A purported San Diego threat shows up on Craigslist and gets press.

Meantime, in Orlando, a shooter’s wife is under the microscope.

The Electric Shift

Volkswagen is planning to make a major effort into the electric car business.

The move to electric cars, when you think about it, may not do a lot for pollution overall (still have to burn fossil to get power stations running), but it will certainly help big city air.

Now, if car companies would just get rid of the silly annual model scam, there might be some hope for this rock.

The Matrix

That billionaire social media fellow is predicting we will be plugged into The Matrix in another 50 years.

Sorry, my money would be on we will be back to sticks and stones by then…besides, we’re already living VR…

Comments

Halfway to My Blow-Off Forecast? — 26 Comments

  1. George, maybe you should talk to someone mistakenly put on a no-fly list just because of something like having a name similar to or the same as a previous ‘disruptive flyer’, or some other ridiculous reason. It can take YEARS OR FOREVER to get taken off that list; meantime, you’re defenseless against a CRIMINAL who likely got a gun from an ‘unlicensed gun dealer’! What we need is a ‘flagged nutbar’ list. It would have stopped Loughner from buying a gun ‘legitimately’, as well as many others. Remember the warning of Benjamin Franklin: “Those who would give up essential Liberty, to purchase a little temporary Safety, deserve neither Liberty nor Safety.” Dominoes, my friend, dominoes.

    Robert in WA State

  2. Oakland, CA installed red light cameras that were purposely cut shorter (the yellow light) to gouge drivers. Ticket went up to $580. Since those property values crashed, so did property taxes. Nat’l, State and Local Govt did furloughs, etc to ride out the pinch…what will they think of in the next crash (which will be MUCH LARGER, according to Prechter…)

    p.s. Let’s put the known mentally unstable of all persuasions on a No-Buy list (Sandy Hook’s mom could have locked her guns up, James Holmes should never have been able to purchase, etc…).

  3. If you can’t hold it you don’t own it.

    Get back to me in a month or so.

    Should be crystal clear by then but unfortunately the water that has passed under the bridge ain’t never coming back.

  4. 50 years hence “Sorry, my money would be on we will be back to sticks and stones by then…besides, we’re already living VR…”

    hehe – bingo. I figure the same, and agree with you on nested VR existence. Seems the idea of reality itself being a ‘simulation’ is catching hold with a wider audience, too.

    Sticks and stones are pretty amazing when you think about it. Nature makes way better stuff than mankind anyway.

  5. George,

    Have you figured into the equation a Brexit vote to get out of the EU. If this passes next week it will put a huge pressure on getting out of Euro’s as they will be going down in value. This means that money will need to go somewhere and I think that somewhere is the U.S. dollar which will push the price way up for a time. Also another landing spot for fleeing euro’s is gold and silver…..could be a game changer type scenario…….just a thought……

  6. George: Could you write another brief comment stating the reasons to sell off your big expensive home or a 2nd home. I am trying to convince a good friend of mine to sell there 2nd vacation home (condo which they lease out to skiers and some summer months) which they have a huge mortgage loan on. They just do not understand what is coming!

  7. There is a former IRS exec who is probably a likely choice to head the new comission to gets to leave the “lists”, & recommend who gets on them. I’ll bet she already has a list of new canadates.

  8. Interest rates will NEVER recover. It would kill our budget because at $19 trillion of debt, a 2% rate increase moves interest to 30% of the federal budget. When we have a next recession, tax revenues will decline. Deficits run up to 1.5 trillion with a T, and in 6 years we are at $30 Trillion debt.

    Then what?

  9. George, thought you were saying 1st: a big decline, then 2nd: a big run up as money flees bonds/debt into equity, then 3rd: the humongous decline? Now you seem to be saying just up from here until the big collapse? Tough for us landlubbers to follow you sometimes.

    Regarding market timing, was reminded of this one: They say it will kill you, but they don’t say when.

    Best to you and the family, Mike.

  10. Right now there is NO documented way off of the No Fly List, regardless of whether it is tied to gun purchases.

  11. Senator Ted Kennedy got put on the No-Fly List, along with several infants. I wonder if the infants ever got removed. If there was due process (there isnt/all secret) I could get behind this bill.

  12. S&P low 2,051.35 — George was saying 2050 support.

    Another good call.

    • George, went lower – you can delete my other post above.
      Low so far, 2050.37. Still a good call.

    • As Peoplenomics readers knew, I was looking for a decline in the SP to around 2040.
      I exited that [position hyst before Fed time and went long – thanks for asking

  13. Hay George,
    Do you have a write-in candidate choice, when Trump drops out of the race? I will be voting for Ron Paul in that case. (please pass this on).

  14. Well George a couple of rather disturbing thoughts on both the Fed. and its drum rolling beat that we well just ain’t going to raise the rates, which the fat cats on wall street knew before the Fed. knew and of course brother-in-law and spouse buying a new house, when they might better wait awhile because if we are in a depression 2-4-5 years from now that $100,000 house will be worth just how much?.

    • If the money supply is up enough…I mean think about it…if money goes up your standard of living can go down, but you can still pretend to get rich

  15. “But should someone on the government’s no fly list, or someone on a terrorism watch list be able to freely buy?”

    Suppose you are arbitrarily put on the no fly list because of something you published at Urban Survival? What would you do about it George, and how would you get off of it? that’s the crux of the matter, no due process.

    • If there is a way onto a list, there must be a way off – and that I think is where Trump may be able to moderate the extremists on both sides and maybe we will get due process

      • That’s a lot of maybes. The old ladies and little kids on the list appreciate your support of the Constitution.

      • That’s a rosy thought but maybe just a tad subjective? Remember that even Teddy Kennedy landed on the list, but hopefully you are right and Trump has the brains to instill due process into the issue. Then, yes, it would make sense.

      • From what I have seen/read/heard, if one is erroneously placed on the do-not-fly list (has happened to quite a few folk), it is like virtually impossible to get off of it but can be done, BUT it takes years of hard work on your part and $ to do so. Not a simple proposition.

      • There’s the problem: no due process (another constitutionally guaranteed right).

        with the no fly list, they don’t have to tell you how you got there, you can get there without being convicted of anything more than “suspicion” and there is no process to get removed. 800,000 people on that list at last check. I’m quite certain that not all of them are… uhm… ‘valid.’ Even a US Senator was on the list for a time.

        So until they get that resolved, I am opposed to adding the no fly list to the FBI criminal database.

    • Seem that if someone is placed on the list through some error, and subject themselves to a bit of scrutiny (and the inevitable bureaucracy needed to keep the scrutiny “equal”) to establish that they’re not “No-fly List material” then they should be taken off of it.

      BUT, here’s where I see yet another legal industry opportunity (planned or otherwise). It would generate a herd of attorneys scrambling to get their ads out telling everyone that they specialize in helping to get people removed from various lists. Maybe a bit of lobbying to make sure even more people are placed on the list would follow so as to generate a client base for law firms. Naturally in a few years deals would be cut, precedents established and who knows what becomes “normal” on the other side of it all.

      As twisted as it may sound, my thinking is to leave it alone and rather, tweak the entire process that created the lists in the first place. Otherwise we risk morphing the whole No-fly list thing into something even more onerous. Or, we could simply push for DC to shift us back more in line with the Constitution. Yeah I know, good luck there for now.