SBT: Substitute Bubble Theory Says Bitcoin

A remarkable idea has put my “brain on fire” since it occurred to mean at 1:345 AM today:  What would have happened to the Stock Market in 1929 if there had been a widespread, Tulipmania-like competitor to investing in stocks at the September 3, 1929 all-time highs?

It is well-documented in the literature that bubbles in one class of investment are only loosely linked to performance of other investments.

We can see this working out in the Housing collapse circa 2008-2009: In April 2009 the Case-Shiller/CoreLogic 20-city housing index stood at 139.26.  Although a lower-low was recorded in a few years (134.08 in February of 2012), the index was up to 198.97 in May’s data reported in July.  New figures through June will be released next week.

(Continues below)

 

My point is that housing has climbed 42.87% since the initial 2009 lows.

Now consider the stock market’s performance.

At the initial low (March 9, 2009) the S&P 500 posted 683.38.  The day before yesterday, the S&P closed at 2,458.11.  In other words, stocks are up 3.6-times what they were at the Housing bubble initial low.

There is a dynamic to “popping bubbles.”  Often, you get one hell of a run-up and then a dump.  The prices go from overpriced to underpriced with not so much as a sober breath in between.

It is fair to wonder “Why did stocks go down more than Housing?”

The answer, I suggest, is simply this:  All assets fall into a hierarchy. The urge to maintain home ownership – especially if you have that lake house you’ve dreamed of for so long – is generally a higher priority than owning stocks.  It would be logical, therefore, to expect people to unload stocks to keep real estate.

Other such relationships have been noted in the past:  One of my colleagues has held that gold and silver are less firmly held than stocks.  “When a big trading outfit gets in trouble in a big position, they will sell gold, silver, and event the kitchen sink, if they can, to keep their position and avoid default.”

Wait!

As we try to assess what went on in the market Thursday, where stocks lost 274 points by the Dow, we didn’t see a commensurate drop in gold.  Until the “old way” of viewing things, gold should have dropped, not gone up.  Yet there it was – going up and this morning it has breached the $1,300 per ounce mark.

Now let’s consider the bubble in Bitcoins:

Bitcoin performance in a high stress situation hasn’t really been tested.  What we do see, however, is an eerie similarity in the shape of the curve to the run-up compared with how the Dow ran up into the 1929 market highs.

(You might want to cover your eyes if you’re a Bitcoin True Believer!)

And so, we look at the market this morning little-different than our view of yesterday.

Last week I mentioned the possibility that the top is in.  If you missed it, see Is the Market Top Already In?

That was followed by a pretty good call into the rally earlier this week in Rally to Our Top Call?

This morning, we are pondering the performance of our Peoplenomics daily Aggregate Index, which as you can see in this corner of the chart, slipped below a well-established trend line Thursday.

[Courtesy of our generous subscribers:  Daily Peoplenomics Aggregate Index in  prevailing short-term trend channel (solid) with 9-day moving average (dashed).

Obviously, if it looks like we will close under the trend line today, then we will return to cash and await developments, or simply go short.

But will that happen?  Perhaps not.

As I’ve mentioned before, there some good arbitrage to be had between last night’s index expirations today’s equities expirations.

A 60-90 point upward pop an hour, or two, into trading would keep us glued to the monitor.

If someone was in big trouble, we would have expected lower-hierarchy assets (gold, bitcoin) to have begun to drop – yet that hasn’t happened, yet.  BTCs were around $4,310 which is only off a bit (sorry for the pun!) from recent highs, and gold is actually up.

Another week to the final highs is possible, but we never “marry a position” and remember that “Cowards who sell and run away, live to trade another day.”

We have our track shoes warmed up on hot standby.

There’s a lot more – and that will be in our www.peoplenomics.com column tomorrow morning once we have seen what the day brings.  Those “high rollers” who ante-up $40 bucks a year really do get their moneys-worth.

But even the freebies here are useful, such as today’s “Productive Ponder: What would have happened in 1929 if a convenience mass hysteria in a non-stock or bond “investment” scam has been present rather than the market blowing off?  Would there have been a Great Depression if all the hype had been defused as the BTC alternative is presently providing?”

The News of Trump

Debbie got the sweats, we wonder?  This as 4-COUNT INDICTMENT Federal case against Schultz’ ex-IT aide expands. 

We also see how the FBI has ‘reopened’ case on search for Lynch-Clinton tarmac meeting records.

But the media meltdown continues as Trump targeted on covers of Economist, New Yorker magazines and playing the role of Carnac the Magnificent?  ‘Art of the Deal’ ghostwriter: Trump will resign.

 

The News – Minus Trump

Barcelona and Cambrils attacks: Hunt for suspect in Spain.

Top fund investors pumped brakes on fast-rising Tesla: filings.

Exactly, Precisely Right (again)

One of the headlines this morning?  Commanding officer of Navy warship in deadly collision relieved of duty.

We covered this in our June 17 Peoplenomics report and here’s what we said:

Third Base
Destroyer Captain Screwed
Please allow me to share from my fount of nautical expertise won  from 11-years before the mast.  (Remember: I lived on a 40-foot offshore capable sailboat for more than a decade and you can’t help but learn a few things.)

1.  There are two sides to a boat.  The “starboard side” is the right (when facing forward – toward the bow.  The “port side” is they left side of the ship when facing forward.

2.  When ships/boats are crossing one another’s path, the vessel whose captain sees another vessel to his right/starboard is the “burdened vessel.”

3.  The ships/boats whose captain sees a ship to the port side is called the “stand on” vessel.  While crossing paths, the “stand on vessel” is obligated to maintain a steady coarse and speed as the burdened vessel is obligated to adjust speed and heading to avoid injury.

4.  Viewed from another ship, any vessel will have a green light on the starboard side at night meaning that ship to right (the stand on vessel) has a “green light” to proceed on course and speed.

5.  There is a red light on the port (left facing forward) side.  It tells others, spying the ship we’re on, that they must maneuver to avoid collision because we are the stand on.  Red light means stop, don’t his this.

It ain’t that complicated.

Which is why, when a U.S. Navy destroyer collided with a Philippine Cargo Ship, we only need to notice that the damage to the U.S. ship was on the starboard side.

Anyone remotely familiar with admiralty law needs only to glance at the photos to see the destroyer was the “burdened” vessel and always has the duty to maneuver to avoid collision.

The only possible defense for the captain in this ill-fated situation, which may have caused the loss of 7 sailors, is if the Philippine ship changed course and speed.

Otherwise, look for a negligence court martial after what should be an admiral’s mast to determine facts.

The damage on the starboard side amidships is pretty damning evidence.

Fog, cargo carrier course change, avoiding yet-another vessel not mentioned or terrorist speed boat (no mention) are about the only things that will keep the skipper out of harms way now.

As we predicted, the officers involved are screwed.

I mention this as a kind of “follow up” to the discussion we were having yesterday (Where did Variety get the Williams “death threat” tip?).

In addition to looking at the source of a news story, just understand the rules of conduct, due process, and procedures, will often set reasonable expectations as to outcome.  In the case of the ship tragedy, two months in advance.

Off to do the to-do, so adieu to you, I’m through.

Comments

SBT: Substitute Bubble Theory Says Bitcoin — 26 Comments

  1. Jon, I agree with you. Bannon will destroy what he created.

    Trump has become too much of a loose cannon. I was hoping he’d be more thoughtful and contemplative in his public communications. Especially after seeing how the liberal media takes everything he says and weaponizes it, but he hasn’t seemed to learn how to not give them that ammo. Instead he gives his detractors everything they need to destroy him.

    Nobody wants to be tainted by his association with them.

    It’s just a short matter of time before Pence becomes president in my view.

    By the way, I read a description of a coast to coast show coming up on Weds, 8/23. Here’s a brief synopsis of what will be covered. …”newly released documents indicating that government agencies are hiring citizens to promote specific agendas, posing as individuals on social media, and as talk radio callers-“…

    It made me think of you.

    • “thoughtful and contemplative” ha ha. Was it Trump playing for the World Wrestling Federation and giving Vince McMahon a haircut, Trump’s time with the Miss World competition or his work on the apprentice that gave you that idea??

      Trump delivered exactly what he was, what his voters wanted and what you voted for. No surprises. You set the table now you have to eat it. It’s your fault.

    • Wavecrave, did your little diatribe make you feel better? I don’t hate Trump. Just disappointed in him. I wish him no ill harm unlike his detractors on your side. Draining the swamp is still a great concept. It will happen one day.

  2. My husband a grad of the coast guard academy said the exact sane thing the min was announced he thinks the watchman was afraid to get the old man up and didn’t realize the give way vessel scenario. So,there . You are not alone
    Marianne

  3. I wonder how the investigation into the tarmac will go, since the pilot became dead once the news of the meeting broke.

    • Wait! there’s no Clinton body count! That’s just a made up fabrication of the alt-right – didn’t you get the memo? LOL coincidence? uh huh…you bet’cha.

      • Confirmation bias – when folks believe fake stuff as long as it supports their “opinion”.

        Folks who help to amplify the fake news are undermining democracy and supporting our enemies.

        Adults unable to discriminate between real and fake are incapable of teaching children how to.

        http://www.snopes.com/clinton-lynch-pilot/

      • yeah I know but you could do what they call a running of songs you know like one verse of this one one of that one and one of this one but that’s an idea I don’t know how far you can go or how many words or how many notes you can use out of a song before it becomes using another information

  4. Well gee Beev, I was disappointed you didn’t tie in the elite banker jumping to his death at the London stock market 7th floor balcony yesterday to the stocks tumbling yesterday. He shouted something in the neighborhood of, we’re all screwed, before leaping to his death.

  5. If the major seller in trouble was a sovereign, wouldn’t they sell their U.S. stocks (at a market top to boot) and hang on to gold? The bond rise doesn’t line up with that though, unless they are just human and refuse to sell the losers. OTOH, it has been a while since we have seen serious option expiration shenanagans, time is ripe.

  6. “When a big trading outfit gets in trouble in a big position, they will sell gold, silver, and event the kitchen sink, if they can, to keep their position and avoid default.”

    I’m sorry George, but I don’t understand this. Are you sure that all big trading firms hold a lot of gold and silver? Why would they?

  7. A redacted US Navy letter (link below) posted online from the Commander, Carrier Strike Group Five to the Commander, Navy Personnel Command, states “the injuries to the three surviving service members, and the deaths of seven sailors, occurred in the line of duty and not due to misconduct.” However, later on in one of the letter’s attachments, the ‘misconduct’ aspect is directed at the injured and deceased, not at the command crew.

    A Reuters article immediately after the collision stated: “In the first detailed account from one of those directly involved, the cargo ship’s captain said the ACX Crystal had signaled with flashing lights after the Fitzgerald “suddenly” steamed on to a course to cross its path. My take? No cargo captain would admit to the press that they were in the wrong.

    According to the Reuters interview with the cargo crew, the container ship steered hard to starboard (right) to avoid the warship, but hit the Fitzgerald 10 minutes later at 1:30 a.m., according to a copy of Captain Ronald Advincula’s report to Japanese ship owner Dainichi Investment Corporation that was seen by Reuters.”

    Initial unverified/redacted reports from Navy personnel involved in the collision stated that the Cargo ship made an abrupt U-turn into the path of the Fitzgerald. This may have been done for dock timing reasons (a navigational time control maneuver called a ‘trombone’). Regardless, from where I sit, situational awareness was entirely lacking on a state of the American art warship. The captain was sleeping, but he is ultimately responsible for everything that happens, good or bad, on that ship. From the Navy letter linked below, the captain is lucky to still be among us, although he may not think so right now with an Admiral’s mast looming.

    See this site for the lengthy USN letter:
    http://www.trbas.com/media/media/acrobat/2017-08/70316349680760-17151358.pdf

    • You need a ribbon and a medal for that because I think that’s exactly as it were
      I have told a few friends that I thought that the captain of the ship was sleeping or were unaware course you could have the time line thing you can have all kinds of woo-woo stuff but it comes down to it could have been prevented but it wasn’t and whose fault was it as George said it’s the people which is the military who were involved I mean how else is that possible besides Lulu science timeline things but in Normal scenarios it would be that they will probably sleeping and I don’t Neva know what time it was I mean with the advanced technology we have on our ships with someone sleeping partying drunk passed out or what what was the problem that they didn’t see this happening coming in or was there something going on elsewhere you know the so many levels to this so many possibilities and that’s what I do I try to open my mind to all of those because alright let’s try it right now the possibilities right now unreasonable you know absurd so yeah that’s what we’re dealing with
      So who’s at fault yes it was a human error in
      , yes it was a ride and the manner that the ride was it was just floating and there was lots of broken bones pho no there was no intent from murder on this and it will be confirmed with two or more people that everything was ship rigged properly but what there is a metempirical springer toward terrorism, as they try to squeeze in weak tunes that resemble the myelin, the people that are in charge of these dealings or like pythons with three heads, and they are smooth, and part of the Alama and you won’t find them listed as such but that’s the codename Alama

      • Hey I don’t have to be right all I have to be is entertaining well IT would help if I was right once in awhile LOL

      • Hey George how’s that podcast music coming along you member I said something about Sarah what does the song call Sarah look into it I know you know it see how that fits in

      • why Sarah well just about all of us has been heart broke I’ve been married three times I guess you’ve been married a couple times so over 50% of the population is divorced so I guess that would call for a Sarah to shake up the emotions of the Apopka latian on the George show

  8. But, is it possible that the navigation system of the destroyer was hacked and the crew is not at fault. Those pesky Chinese or Russians !! This could be part of the new technology the Russians used to throw our cruise missiles off course in Syria.

    • 12 crew members along with the Command Master Chief and the Captain and XO were “fired” from the ship. 12 crew members would comprise an entire watch section on duty at the time of collision, forward look out (remember Titanic?), Port and Starboard lookout, aft lookout, after steering, quartermaster, helmsman, boatswains mate of the watch, messenger, conning officer, junior officer of the deck, and signalman as well. In addition Im surprised combat informationcenter personel didnt catch hell. They are the ones asisting in identifying targets as friendly or foe (skunks) for tracking by the watch section using things such as AN/SLQ 32 short range as well as over the horizon radar and or AEGIS. Major disconnect and unfortunate accident. lookouts should have seen / reported something confurming visuals on tracked targets as well as visuals not picked up by CIC that does occur based on conditions but is rare. Signalman too if the other vessel was flashing lights. Boatswains mate of the watch, JOOD, and Conning officer will be in as much hot water as the Captain.

  9. Thank you so much for deciphering the situation with the Navy Captain. I saw an alert on this yesterday and wondered.