New Reader Note: Our most serious articles on Long Wave Economics are over on the www.peoplenomics.com site and the one Sunday about how to build your own Options Radar to look into the future is pretty doggone interesting.
Remember that? And I have told critics since that although the 2007-2008 high looked like a new high, it wasn’t when you use an Aggregate Approach to the market.
Yes the Dow and S&P did good, but what about the $5-$8 trillion that was blown up in the Dot Com Bubble? No one wants to remember that, but it was very real and it still has to be included in honest calculations about markets and economy.
Which is why I spent far too much time this weekend (most of Sunday) staring into my Options Radar and wondering why there is an options oddity in December.
Our Options Radar hints that Friday’s notion was 1,450 down to 1,400 on the S&P.
My consigliore thinks it’s because the options crowd is trying to salt year-end bonuses, but we shall see what today’s options data looks like after the close.
At the moment, futures are looking for a hard down which should continue through tomorrow and then we’ll maybe get a “turn-around Tuesday.”
Regardless, my friend Robin Landry’s work suggests that this move down MIGHT hold at S&P 1,812-1,820. Which would be nice.
There are some real drivers in here to keep an eye on.
One is the SSE (Shanghai Stock Exchange) which dropped more than 8% overnight. And that’s leading to a global 2-3% downturn in markets today. The dollar is tanking vis-à-vis the Euro which is a kind of de facto devaluation.
But let me explain this Aggregate Index of mine that is updated twice weekly on our subscriber side, www.peoplenomics.com.
The index is built on the notion of putting equal dollars in 2000 into the Dow, the S&P, and the NASDAQ Composite.
When you double-click that chart above, you’ll see it is rotated. And that’s EXACTLY the effect of inflation.
As to specifics: The week of March 24, 2000, my Aggregate stood at 13,091.83.
Where should the Aggregate be today, just using the Minneapolis Fed inflation calculator?
17,989.14. This is NOT where the Dow should be, this is where our proprietary Aggregate should be. My Aggregate closed at 15,405.09 Friday.
Well, guess what? Never made it. 16,898.64 was the high-water mark on July 17 and our Trading Model turned negative the week ending July 3. 7 out of 8 weeks since, the Model has been screaming “Down We Go!”
Yeah…so what does this have to do with the headlines?
Well, tomorrow (Asia time, which is tonight our time in ‘Merica) the Chinese market comes to a major inflection point. I’d explain in Elliott Wave terms, but you’d glaze over.
The main thing is, if the Fed is going to do anything to hold the slide in the markets, they MUST make a major announcement today.
The two likely choices are?
1. They could announce NO RATE HIKE UNTIL THE ECONOMY FURTHER IMPROVES. Bully-pulpit QE-4.
2, They could also simply announce QE-4 because as we explained in our Peoplenomics analysis this weekend, the flow of imports is going back up.
3. The USA could hint that we are going to Devalue, too. In which case, American exports would become more competitive. Exports might increase and gold would go to the moon., But there would be plenty of pain. Forex markets are doing it, regardless.
If they DON’T come up with a “surprise announcement” early this week, as my fixed income buddy asked:
If this gains steam and I mean 1,000 to 3,000 point down days – we’ll see where that great depth of market HFT industry ends up……….
Yeah, between that and the big derivatives problem for the Big German Bank that no one is talking about (low visibility at this point) the most likely course for the Fed would be to take pricing of a rate hike out of the equation.
Still, Landry’s S&P 1,812-1,820 spot sounds good to me.
More targets for Peoplenomics readers Wednesday, but the main thing to think about is that on an Aggregate & inflation-adjusted basis, the may be only (1) down of the Grand Super Cycle III.
The other reason the Fed will have to announce no rate hike (and maybe a QE-4 is that we are very close to Ure’s Discontinuity – a concept we have discussed many times in the past:
What is Ure’s Discontinuity?
Think of it this way: It’s the point at which stocks hit their peak in terms of pricing to yield. Our Trading Model says we passed that around the 4th of July, or so.
The problem is that when yields go negative and stocks can no longer pay dividends (due to consumption collapse) things all roll up and hit the fan. Stocks become worthless because a) they can’t pay dividends when people aren’t buying (consumer spending free fall) and with no buyers, supply / demand failure becomes the statistical guillotine.
Unfortunately, the Obamanista regime (along with the Clintonistas and Bushitas) all seem to have had lofty goals when them embarked on the Mexification of America.
And the problem is what? Well, the whole point of this (in case you missed it) is the People in Power don’t understand money worth a crap. Sure, they may get the social engineering/socialism part, but they miss that if no one buys anything, the end is here.
There is also this misguided thinking of the Aristocrat Class (from which we get the Hillary and Jeb show) that it is possible to rip off an entire generation’s savings. (which is the point, you see?)
The problem is you can’t have destruction of debt without destruction of savings. Read that several times and let it sink in.
So things are wining up for the fan, but turn around Tuesday is possible, and if not, why did UrbanSurvival start writing about this stuff in 1997?
Well, because we’re there. But this is only Wave (1) down of the larger long wave III (when you adjust for inflation and equal allocations to asset classes, which is the only honest accounting there is.)
The time I will go short is when we rally 50-61.8% from whatever the low happens to be.
Denial is a hard thing – and in coming months that may be your hardest opponent. Preserving your job and keeping your retirement coming in.
Even this morning, a reader reminded me:
“No economist has found statistical evidence which demonstrates the existence of the Kontratieff Wave”
The problem with most economists is they spend far too much time on the quant side, proving this or that, but as our Aggregate Shows, they are perfectly capable of missing the $5-9 trillion lost to the Dot Com bust and they are not prone to using inflation adjusted numbers. Or they will use a base year that makes their case. I figure everything against 1913 when the Fed elbowed in.
Instead, these economystics make grandiose statements like Alan Greenspan used. Phrases like “in the committee’s judgment.” Judgment? Try positional power in psychology!
Cycle Theory in economics, including our own work in the early 2000’s that predicted collapse when fiat currencies become 95-98% debt-soaked, are habitually decried by so-called economists. Yet here we is, as Pogo would phrase it.
The same guys who’ve been promoting Free Lunch since the last Depression. Keynes was wrong and the Monetarists are going to score another spectacular win.
All of which could be avoided with honest money, balanced budgets, and real borders. And tariffs to equalize working wage differentials.
And in other News?
There isn’t any.
Though like the headline says, wake me up when the Fed decides to speak. Right now it’s the PPT playing in the pre-open.
Got just the thing for the Plunge Protection Team right here: QuikClot Advanced Clotting Sponge, 1.75 oz (50g). Don’t know if it’s available in the Trillion Dollar size, or not.
God, do I have patience. 15-years waiting to say “told you so.” But we really may be there, now.