Long Waves for Kids: Fall 1927

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.

imageIn fact, the me-too media has said damn little about the ongoing and critical collapse of the velocity of money.  Check out the chart to the right.

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.
  • Should I mention the time lag between appeasement and war in the Middle East?
  • 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:

    <http://www.independent.co.uk/news/world/middle-east/saudi-arabia-vows-to-set-off-new-middle-east-arms-race-and-match-irans-nuclear-capability-10250789.html>

    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.

    Happy Friday!

    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.

        

    Comments

    Long Waves for Kids: Fall 1927 — 4 Comments

    1. “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.”
      if you really look we are clearly in a Fibonacci spiral.. after the new administration the new guy or woman just like the present administration was sitting in their magic chair with the vision of what they see as reality.. when they get into office.. and the out going president and incoming president are walking along the beautiful windowed corridor.. and the outgoing president is patting the incoming president on the back saying what a skillful job he has done in his campaigning .. he is really saying… TAG you are it.. then the incoming president gets the true view of what is going on with everything.. How they react or if they have a congress that decides to actually do some work.. or just read what they are voting on will decide the fate of the people they are all working for.. what was it plato had to say.. the downfall of civilization happens when those that rule become greedy and the people they rule ignorant.

    2. Since the green stuff in your wallet is not based on anything but very warm air – confiscation of gold and silver will drop the price of those to nothing – unless it’s like the “Cash for Clunkers”. When last the government confiscated gold – our money was backed by it.

    3. I don’t hate Warhammer…I just don’t believe a thing he says. Reading his prognostications is like reading play by play from PNAC. I like the way he describes Yemenis trying to get rid of US/Saudi/Israeli puppet government as a festering civil war. Haven’t we been droning Yemen since 2009, claiming to be attacking AQAP(Sunni Wahabbists)? Aren’t the Houthis(Shia) anti-AQAP? Then his claims that Teheran is arming and urging them on. Are these claims as reliable as his previous statements about the use of chems by Assad or his claims that Russia invaded Ukraine/MH17 downing by missile? As for Saudi, their BS about matching Teheran, uuuh, who is it that has made a deal with Pakistan to buy a nuke? What was the uproar from US/Israel over that? NONE. Who in the world would want to see a nuke capable Saudi? Imagine what the Wahabbis(who WH never mentions) could do with that capability. If he’s waiting for fireworks, wait til the Iranian Red Crescent ship with humanitarian aid (which I’m sure he would claim to be weapons)is interfered with. If there is a glass parking lot there soon, we all know who will be responsible, unless he has ‘inside’ info that Iran already has nukes(the Intel services, including Mossad, would love to see that data). Also, for his information, it’s not Camp Davis, it’s Camp David.
      As for BB King, he and Lucille will be missed.

      • Ditto that. Warhammer has the worst track record since what’s his name with the net bots! I told Clif High that he was getting interesting data, but he really did not know what he was looking at. He didn’t believe me of course. Into the dust bin of history for him as well.