I don’t often give much space on the UrbanSurvival site to our Peoplenomics™ work on markets. That’s reserved for people who support this site with a $40/annual subscription.
But I want to break with tradition this morning to put into perspective where we COULD be in the greater scheme of things.
The chart above shows what would happen if we line up the market break in 1921 with the market break low of 2009 following the Housing bubble collapse.
THIS IS NOT INVESTMENT ADVICE but as you can see, there is a case to be made for a rally into this fall, a pullback this fall, and then a stunning rally in 2016 before we collapse in a heap.
What would those dates be?
Well, the week we are in would correspond to November 3, 1927.
The absolute top (although it’s hard to imagine such a perfect fit actually happening) would come ideally around March of 2017.
Then we would have two (back to back) 76 week periods of horrific decline.
But between now and that first low mid August of 2018, we could see a lot of interesting things happen.
For example, I would expect gold to make a move to the 2,500 area and silver could hit $80, or more.
But the problem ahead would be remaining fleet-footed.
People like to imagine the market falling apart any day now. And why not? It sells newspapers and builds the web site traffic for the genuine doom porn types.
While I like catastrophism as much as the next guy (I made money in 1987, lol) the fact of the matter is there’s usually some logical basis for my outlooks, not just an urge to scare people in the me-too sort of way.
The Internet is a hugely circular place. And that’s why I don’t spend a lot time trying to keep up too much with the doom porn types. But I won’t bullsh*t you: I’m not too worried for American until after we get to the 2016 elections.
I don’t know if it will be due to the outcome of the elections, something about inauguration, or some financial calamity that will slap us in the face. But between now and then, short of the expected pullback to S&P 1,740 along the way, maybe this fall if we don’t get it in the June-July period, we know we’re going to his the biggest decline ever.
We just don’t know how all the fiddling with backdoor bailouts and Fed policy will play out this time around. We could go any time, sure.
Velocity has just imploded to the lowest level in Ure lifetime.
So, let’s talk about Velocity for a moment.
Velocity is like annual inventory turns. In accounting, it’s easy to think of money as having turnover.
If you lend someone $10-bucks, then spend it, and repay you, that generates $10 worth of local economic activity. When you lend it out twice in a year (and get repaid twice) you get $20 worth of economic activity.
There was actually a time in the country when rolling over money happened twice a year…but that was during the go-go internet bubble lead-in.
What has happened now is that the turnover in money is down (as of the end of April – this is only published by the Fed quarterly as a chart) to only 1.5 turnovers per year.
Eventually, the Fed gets us into a terrible spot where they can’t print enough money to keep things afloat and they simply give up. That’s when gold and silver confiscations have happened in the past because government – facing falling tax revenue, but on the hook for tons of social commitments – can’t do anything except confiscate everything that is not nailed down.
The good news – such as it is – is that velocity could pick up one more time. But currency collapse it out there down the road as an obstacle to peaceful future.
The real crap isn’t likely to be fully appreciated until late 2017/2018. But then, however, the
“insolvable” problems will be really in our faces:
- The migration from the California/Southwest drought
- The extreme lack of jobs from…
- Economic displacement from robotics and business process software and…
- Lack of R&D spending
- Collapsed disposable personal income from mounting government mandated spending on various insurances (car, health, etc)
- And let’s not leave out self-driving cars and…
- Virtualization of life and microhomes plus
- The consumption impacts of a declining birth rate, LBGT spending changes and the impacts of environmentalism.
This last point is sort of savory: The Wikipedia entry on Neville Chamberlain puts appeasement a couple of years ahead of open warfare with Germany…so by then any appeasement of Iran should result in war in that part of the world.
There, feeling better now?
Empire State Manufacturing Report
It’s just out. A highlight?
The headline general business conditions
index climbed four points to 3.1. The
new orders index rose ten points to
3.9, and the shipments index was
little changed at 14.9. Labor market
indicators pointed to a small increase in
employment levels but a slight decline
in the average workweek. The prices
paid index fell ten points to 9.4, its
lowest level in nearly three years, and
the prices received index edged down
to 1.0, indicating that selling prices
were flat. The index for future general
business conditions fell noticeably,
reflecting a positive but less favorable
outlook than in April.
The rest of the report is over here. The only question is how close to Ure’s Discontinuity are we, the point where declining interest rates quite suddenly drop to negative numbers and stock and bond prices collapse…
War Notes from “Warhammer”
Yeah…you hate him…but his track record is very good at looking ahead…
“The Saudi’s just threw a turd in the Camp Davis swimming pool:
Whether diplomatic posturing or downright steely-eyed threatening, in reality the Sunni Saudi sultans are simply telling it like it is. One need not look further than the civil war festering just south of Saudi Arabia’s border in Yemen. The Shiite Iranian mullahs are fueling the fires of war by arming and otherwise advising and supplying the Yemeni Houthi opposition while a Sunni coalition, led by the Saudis and Egypt, provide armed support to the self-exiled ruling regime’s leadership.
Imagine throwing a few nuclear fireworks into this already messy mix! I’d put even money on there being more than a few black glass parking lots popping up in cities such as Tehran and Riyadh. We could have our very own modern-day Middle Eastern accounting of the ‘legends’ put forth in the ancient Indian Mahabharata texts.
I don’t think I want to imagine that, or at least, not yet…locks on the economic tumbler of future need to fall into place, first…
Not much else going around the MSM except the Nepal helo recovery and that’s a minor story in the greater scheme of life. Although I’m sure we will inevitably hear today how the victims of the Philly crash are still dead…
Passings: B.B. King
At age 89. The thrill is gone.
Thank you, brother.