As I disclosed to our Peoplenomics.com subscribers this weekend, I took decent-sized (anything over $25,000 is “decent-sized” around here) leveraged short position in the market right at the close Friday.
Nerves of steel, momentary trading-insanity, or a wild speculation? This week, we should find out which.
Our odd-ball approach to investing deserves a bit of explanation: We look at “global hot money” as being the outer layer of the Big Financial Onion. The US markets comprise the second layer in. So, goes our nutter-in-the-woods armchair economic theory, if the Global Picture screams “Get Short!” eventually it may be expected that the second layer of the onion will rot shortly after the outer layer.
(Continues below)
This is all terribly obvious when you think about it, but it’s much easier to sell US stocks if you overlook the rest of the world. In my view, however, that’s a mistake.
So how do we construct this global view? We take a collection of markets and then look at it after the US close on Fridays.
For that brief period before trading ramps up Monday in Asia, there’s a time when even the “hot money” has to perch somewhere.
Once you have the two layers of the onion sorted out, the next problem is to see what rhymes in history.
To my way of thinking, the Depression of 1920-1921 is a fine analog to the Housing Bubble pop and drop in 2008-2009. In our charts (on the Peoplenomics side) we line up the 1921 low with the 2009 low and discover (to our horror) that there are two cases that COULD be in play.
One case – we’ll call it the bullish outcome – says that the market lately has only taken a breather from the Trump Bump. That would be similar to the pause that began around December 14, 1928 and continued into very early 1929.
The other case (bearish, of course) is that no, we’ve about run out of steam and from here, the road to Perdition is wide-open.
Our view of the US market is not based on singular (and proprietary) indices like the Dow Jones, the S&P, or the NASDAQ alone. Rather, we aggregate multiple markets using multipliers to “normalize” things to January of 2000.
The backstory on how all this came about is pretty simple: I noted – in the wake of $7-TRILLION being wiped out in the Tech Bubble Collapse (2001-2003) that none of the major brokerage firms were being especially candid with their clients about that gaping hole in their investment returns.
It was easy to gloss-over…just don’t mention it.
As I thought about it, the notion of covering up some bit lies about investing, seemed to be something that ought to be set straight. And there, dear reader, you have where the Peoplenomics Aggregate Index came from: It’s how things would look had you put equal dollars into three indices before the Tech Wreck – and since.
This enabled me to come up with a bunch of interesting (through highly-speculative) investing ideas. Some have resulted in exceptional returns, while others have cost me dearly. Higher financial education using a new approach is not an inexpensive course of study.
For those interested, our two cases this week are as follows:
If we still have a major top yet-to-come, then we might expect the market this week to be up, up, down, down, down this week in the bullish case. Then next week, that would suggest down, down, up, up, up.
The problem with this “rhyme” is that remember the 1929 market crash came 55-calendar says before the September 3, 1929 Crash. Since the all-time high in the Dow Was 26,616, this means with 14-trading days to go, that basis the3 24,538 close of the Dow Friday, the Dow needs 2,078 points to the upside.
That pencils to 159 points per trading session.
Even that might not frighten an intrepid Bull. But then I look at this week and next – and note there are only six scheduled UP days – in the Bullish 1928 rhyme – which means more than 346 points would need to be gained daily from right here – PLUS whatever the intervening DOWN days bring.
To me, that doesn’t look possible.
And that swings our thinking into the bearish column. Ergo, I opened my wallet and plunked down some dough short.
The reason for sharing all this with you is not to sell you anything – although subscribing to Peoplenomics at $40 per year is in my view, an astute use of fund – but rather to put some perspective into investing that’s almost the polar opposite of High-Frequency Trading (HFT) models. We don’t offer specific investment advice, but our take on general news and events I hope is useful.
Those HFT outfits, you will recall basically front-run trades by micro-seconds in order to scalp a fraction of a penny from every trade. It’s not much – barely worth quibbling about – but when the smoke clears, bears make a little, bulls make a little, but the Trading firms? They’re getting RICH.
Now to the Cause of Crashes
In a recent review of Cesare Marchetti’s work (and that of Andrew Odlyzko) two charts appeared in my head that (to me) completely explain cyclical Depressions.
Don’t worry about the timeline or specifics here; but let me give you two companies viewed as S-curves of employment levels.
If you need a specific example, consider Commodore Computer as the blue track and maybe IBM personal computing as the red track.
At first, the real growth was in company #1. But, over time, company #2 came to the fore and company #1 slowly faded into the wherever Commodore went.
What’s critical is that WHILE BOTH WE AT HIGH LEVELS you had what I describe as a Overlap where not only is Commodore going great guns, but so were all the PC makers.
The trouble (in the sector) begins with Commodore doesn’t get traction and begins to decline. As the combined employment of the two firms goes forward, you suddenly get a Boom and Bust cycle!
There’s a bit more on the Peoplenomics side, but this notion of successive booms (and resulting employment OVERLAPS (which then collapse) is the basis of economic cycles, IMHO.
Instrumentation is Hard
That’s the next hard part in our research: How do we assess where companies are? And, how then do we calculate the precise moment of maximal overlap in order to know when to “lighten up” the long side and prepare to go short for the big employment declines to come (in that space)?
That is why this is such a crucial week. A bit more than an hour before the open, the futures suggested a Dow down 80 at the open. But, it’s really where the match-ups go this week.
Still, my informal (but worth betting $25-large on) is that we won’t make a new all-time-high in time and as a result, we will likely see a major decline this Spring.
Now, let’s consider what possible “drivers” will be. I mean, while the real problem is we have run out of new (mass adoption, gotta-have-its) the average investor doesn’t look (let alone understand) the picture of overlap booms just described.
Instead, much of the whole investment community will look to simplify beyond useless in order to keep on making money trading.
Here, then, are some of the so-called “news stories” that will be pressed in the neoliberal press in order to play the Grand American Game of Blame Placement. Sucks, but when the audience is dumb (like the “penis-free” Oscars weren’t proof?) who’s gonna call anyone out?
I recently told a young millennial not to worry so much about political-correctness or “regaining liberties” – just focus on the making and keeping of assets. The rest is just herd mentality. And you remember the herd ends up at the packing plant, right?
Mueller: The Big Fish
The democrats are desperate to find something wrong with Donald Trump. So now, leaked by left-siders, we see Mueller trying to subpoena ALL campaign communications from the Trump Campaign.
We’ve been hearing about “collusion” for over a year and even now, not a single shred of evidence. But don’t let the lack of facts bother you. No, here’s former attorney general Eric Holder saying he thinks Trump will get nailed on obstruction.
Meantime, at the lefties are still enjoying the “free pass” that The Swamp has given Hillary Clinton a free pass. Even with fresh speculation about how the Seth Rich story is starting to read more like a murder than a “robbery.”
Meantime: Legal cases related to this story continue.
Back on point: Mueller and Holder are, as we see it, on thin ice.
EVERYONE on the executive side serves at the pleasure of the President. You can’t charge obstruction when someone is just doing their Constitutionally-mandated job!
Well, then Let’s Blame Tariffs!
As Trump Says He’ll Only Cancel His Trade Tariffs If the U.S. Gets a New NAFTA Deal, we laugh at the political juxtaposition of it all:
“Trump’s steel tariffs are earning him cheers from Democrats and unions—but giving the GOP shivers.”
As As Congress moves to drop tariffs, some U.S. firms cry foul, our thought-framing guidance would be to think of steel and aluminum tariffs as the modern-day analog to the farm price support battles that waged across the top of the 1929 market peaking process.
The Sleeping Sun
Wondering about that Nor’ Easter this weekend?
While you’re wondering, please note that the Sun has continued it’s massive “failure to perform” in February:
A reader by the name of Ray sent along a report that’s a bit strange – but since we like observations from the middle of fly-over country, consider this:
“I lost power Saturday night — 0638hrs UTC. It came back up at ~1314hrs.
Not a big deal, except…
Well, before I get to the “except,” I should probably mention it is incredibly unlikely that anything associated with the East Coast storm was either causative or affective.
Okay, to continue:
My daughter was at a friends’ get-together off-campus at Ball State Univ. The school is on spring break, so there were people coming in from as far away as Tulsa and Minneapolis.
According to my daughter’s friends, parts of IND lost power, and FWA, and CHI. Parts around Kalamazoo, Bloomington (MN), most of Anderson (IN), and many points in-between lost power, all at approximately 0638 (Two of them were driving past Anderson and Ft. Wayne respectively,{80 miles apart} at that time. My kid said they both “totally freaked.”) The only info I’ve been able to search (and locate) reported a “car accident” in MI, and one in Muncie (both at ~0638!?) Power company PSA reported 2919 people out in Muncie. Having nothing to do, I went into, and drove the town. My estimate: 25,000. Roughly 45% of the township (damn’ near all residential) was without power (Remember, I’m a trained observer and storm spotter — I tend to estimate things conservatively. The actual number could well have been in excess of 35k.)
Muncie is fed via three substations, one of which is new and not-yet online. One substation was completely dead, the other seemed completely functional (I don’t look too closely any more, since DHS doesn’t like it when people do such things…) and there were no linemen present at it.
My ponders:
ex- Facebook, Twitter, and Instagram (on none of which I participate), there is, as yet, virtually no information available on any of these outages.
On the Muncie outage, whythehell did the power company so-radically underreport the people affected, and is this now SOP for all power utilities?
My daughter’s friends would have no reason to lie, but they’re all 20- and 30- somethings, and not very observant. Still, sporadic power outages across 600 miles of the wheatbasket, all occurring at roughly the same time…?
Is the lack of availability of information some kind of CYA, or does someone not wish it be known that there were sporadic, widespread, and apparently simultaneous outages in a number of places, and thus discover there may be dots to connect.
BTW, SIDC doesn’t report any interesting solar activity…
Oh, and as I was poking around, I stumbled across this:
Mounds Mall, Indiana’s first enclosed mall, to close April 1 after 54 years
This last point Ray raises is yet-another fine example of successive business model replacement leading to the boom and bust cycle.
Go back up to the S-Curve chart and pretend shopping malls (full of retail clerks and all) are the blue line. The challenger/replacement is Amazon-like companies (the red line).
Then go down to the result second chart and you’ll see pretty clearly how when the overlap ends, the Depression begins.
(I don’t think Ray will like my analysis, but seems real-enough, however slow-motion. Slow enough, in fact, it’s likely to be “swamped out of consciousness” by glitterati stories like “Khloe Kardashian Just Revealed She is Having A Baby Girl.”
It’s just a matter of time before one of the Kardashians makes it to the White House, I reckon. We do live in a world where the real currency of power is name-recognition and position-power, right?)
There…didn’t even need the ViseGrips this morning. Just plenty of coffee and a few Tums.
Moron the ‘morrow….
With government consuming something like 45% of economy assets. Is the main growth potential going to relate to government and “infrastructure” projects. Aligning with growth will continue to be in government. I don’t any private company could possibly get approval to build and “own” travel technologies like the potential hyperloop projects. https://arstechnica.com/cars/2018/03/is-it-time-to-take-the-hyperloop-seriously/
George,
Had a thought about the nationwide trend of “mall” closings, and a possible re-purposing of those properties. Now I know that in order to do so, the egos of the establishment government types will have to be massaged, but those dolts can be bought for the prospect of tax dollars.
Since these properties are for the most part in reasonably good condition, maybe some repairs needed. Why not convert these properties to apartment/condo complexes? Some of the more open spaces (anchor stores) could become secure indoor parking for vehicles, or sectioned off into storage facilities for all the stuff we accumulate. In order for this to work there would have to be re-zoning and an effort on the part of the property owners to provide sufficient security for residents. In the latter case, perhaps making these walled/gated communities would be the answer. The downside, is that some of these properties are in what have become high crime areas. Perhaps adding some sort of mass transit availability for residents would be an incentive, and increasing the police presence would be needed.
From the stand point of the bureaucrats, it provides a source of continued tax revenue. For the property owners, it allows them to continue an income stream. For the community, it keeps the properties from becoming abandoned eyesores.
Just a thought, but then I was raised to never throw anything away.
Have a great day.
Lloyd Snider
Toss in the idea that what is presently the “anchor store” would make a grand location for a “multi-store” – which we’ll get into in Peoplenomics Wednesday – I think it’s a dandy idea!
The USA has about 8x square ft PER CAPITA retail space than Europe. So theoretically half the retail in the USA could close and the USA would still have 4x.
There is a long, long way to go down in USA retail.
George, don’t confuse the present with the future. Wait until Mueller uncovers all the facts before you proclaim that there are no facts of aiding and abetting (no such thing as collusion), which can include encouraging or signaling.
And because we’re dealing with a potential Constitutional crisis, it will need to be pretty blatant. Why, a President would almost have to go on national TV and encourage the ‘perp’ to ‘fence’ more of his ‘contraband’ to be ‘rewarded mightily.’ Ha, ha. Best, Mike.
The ongoing operating costs for an enclosed mall are HORRENDOUS. Big flat roofs, only a couple of stories tall for the most part, and poorly insulated.
Because of the nature of those types of properties they cost a huge amount of money per rentable or usable square foot to keep heated and in decent condition. (most are only two stories).
It is because of their high operating and maintenance costs per rentable square foot that traditionally when an enclosed mall closes it is torn down. Very few other uses can absorb the cost per square foot it takes to operate and maintain those places … to say nothing of their chopped up nature inside and almost impossible ability to “open” that space up or reconfigure it at a reasonable cost (many interior supporting walls that can not be moved etc.)
Generally the best thing that can happen to them is that they are demolished quickly so the land is available for redevelopment into a new and better use for the then current conditions such as multi story office parks, apartment complexes, or even as industrial sites.
I haven’t seen the operating costs per square foot for one for a while now, but as I recall the building operating costs (not counting security etc.- just the building) tended to run in the low to high $20/sq ft per year range about 15 years ago.
(ie: 1000 sq ft apartment would have a building operating cost of $25,000/yr NOT including common area costs that get spread over the rentable square footage – of course that doesn’t include depreciation, owner’s profit, owner’s loan payments, etc.. VERY in fficient buildings in other words for anything other than multi tenanted retail)
No disagreement, but if money becomes short in supply, many places will rot in place ala Detroit. Or get torched.
Our old mall was converted to a community college. Seems to be working out super.
25 large! Wow. Hope you booked that out to March 22.
I would like to proclaim that I was wrong about something.
The center of the Phoenix coin from 1988 economist magazine is not a zero. It’s a theta symbol. It is cleverly disguised. None the less i meditated on it and it is a theta symbol.
It is not related to bitcoin. It’s related to theta coin. This is not trading advise. Be responsible for your own decisions. Think for yourself.
Quite the gamble George. I’m still seeing Dow 32,000. I don’t care if you believe me or not. That is what I SEE.
Back to being quiet.
No need to be quiet. Yes, we are almost for sure in a bouncer – and I am ready for that.
But like the old saying: markets can remain irrational longer than Ure can remain solvent.
Well, the reason I’m quiet is I am considering all the data. I just got a ton of new stuff. Plus I’m moving this week/weekend. And I have a ton of things vying for my attention. I don’t want to give out dis info. And we are still working 6 days a week.
Having a bunch of dejavu today. Wave after wave.
Elaine has been swimming djvu lateluy too – likely an effect of a time jump
When the dollar devalues, 32 on the Dow could actually have less purchasing power than today’s 24.
I took a military bonus of $25k in 1974. My son was offered $90k in 2011. He would have needed $120k to match mine. Minnesota fed inflation calculator.
Same with $5k gold. Remember, the Chapwood index is showing 7-11% real inflation.
Andy, have you gotten the two Mary Summer Rain books that I recommended???
MSR, no I have not had a chance yet. I did meet a very cool psychic lady via Bryce. She definently has some skills. And she is honorable. Just trying to make it through moving/working and getting my pick up out of the shop all at the same time. Lol
What I’d like to see is a separate lighter, electric rail system to replace truck traffic. It would be built to accommodate commerce and distribution points (not people). It would be automated, not requiring drivers or fuel stops. Send to “location” and forget it. No long trains, but separate “shipping cars” to be put on the network. Local and regionally proximate trucking/shipping could do the rest (for now).
This could be a joint venture to all who would benefit, amazon, UPS, USPS, Fedex,current train/rail companies, etc… Government could throw in as well. By removing that traffic, maintenance cost on existing infrastructure would be reduced, and building of new infrastructure could reconsider estimates of current truck/shipping traffic in plans for new roads and bridges.
For electric cars, lanes or raised infrastructure with inductive charging could be used for the “self driving” cars that are planning on going longer distances. That traffic could be controlled similar to what was mentioned above about the shipping network, choosing entrance and exit points along the way.
containers with hyperloop capability?
Correction to previous post, Crypto related Marijuana stock is Abbattis (ATTBF) not Emerald Healthcare (EMHTF) , so sorry-my bad.
And Trump got this tariff passed on the grounds of Nat’l security, who knew Canada was such a threat!
http://www.standard.net/National/2018/03/04/Trump-escalates-trade-war-threatens-European-carmakers-with-stiff-tariffs-2.html
https://m.youtube.com/watch?v=7L50TyW9a8k
Lol lol just kidding.. great movie though.. to bad John candy passed away. God Rest his soul
A chart showing U.S. Steel exporters, percentage by country:
https://www.marketwatch.com/story/trump-steel-tariffs-to-hit-these-8-countries-the-hardest-china-is-not-one-of-them-2018-03-01
Russia makes the list!
Even with the market up sharply today, a Stochastic BUY signal to reverse the 2/28/18 SELL signal was not generated.
“Now to the Cause of Crashes”
that is easy.. the flow of cash..One in three get federal funds to assist them in living day to day.. take that away.. like our house.. our expenses went up a little over two hundred… employers didn’t raise wages.. that two hundred actually amounts to a buck and a half an hour increase in wages and no increase.. and most employers now decrease hours instead of increasing wages..
but then from statistics everyone makes about thirty dollars an hour so hey I am living in the old days.. but in the real world.. you cut an income you can’t spend.. once plastic dries up.. you have to save to buy it.. take food stamps take away the funds.. and that one in three now can’t spend the money that they had to spend it is all going to go towards cost of living. less dining out. no new car’s no tv’s cut cable cut internet.. cut cell phone cut any spending that isn’t necessary..
Tariff… now this is my take on the tariff increase.. absolutely it should be done.. anything entering the us should be taxed and give the breaks to the companies that produce in the usa and hire americans to do the production.. the problem lies there is that we have outsourced all of our manufacturing.. everything comes from someplace else.. Chinese businessmen know that consumers do not prefer products “MADE IN CHINA “, so they don’t show from which country it is made.
However, you may now refer to the barcode, remember if the first 3 digits are:
690-700 Plus then it is MADE IN CHINA .
00 – 09 USA & CANADA
30 – 37 FRANCE
40 – 44 GERMANY
47 … Taiwan
49 JAPAN
50 UK
our problem is it is way to late.. we have downgraded our manufacturing to the point where everyone knows that it will take five to ten years to retool and train.. and here is the kicker.. the equipment that will be needed to retool are all made over there.. and the education has been pushed towards the students from other countries rather than our own citizens of the usa..
so in my opinion because we have dumbed down our children it would take foreign involvement to even teach the technology to any company retooling for manufacturing.
the countries all know this.. and basically can hold us hostage by our own greed even our military is supplied with everything being made in china..
Sun Tzu said: We may distinguish six kinds of terrain, to wit: (1) Accessible ground;
(2) entangling ground;
(3) temporizing ground;
(4) narrow passes; (5) precipitous heights; (6) positions at a great distance from the enemy. #
Ground which can be freely traversed by both sides is called ACCESSIBLE.
With regard to ground of this nature, be before the enemy in occupying the raised and sunny spots, and
“carefully guard your line of supplies.”
http://www.armyupress.army.mil/Portals/7/combat-studies-institute/csi-books/Foundationsof-Science-of-War.pdf this same knoweledge is in the science of war to.. I think chapter two.. but it has been a while since I read the book..
We are subject to our own greed.
our supply lines are with the countries that we could have differences with and they know it.. My opinion is that our congress has sold out our citizens for over thirty years. I don’t think they actually meant to.. but they did.. simply because they took someones word over what was written in those many thousand pages bills they pass that they don’t take time to read or write. the answer would be to read what they pass and especially write what is in the bill by themselves.. but that won’t happen either.
https://www.congress.gov/bill/114th-congress/senate-bill/1571 how many was it that actually voted for this one before it failed miserably.. LOL I am not sure but the number five comes to mind I am not sure if that was the number that voted for this bill or the ones that voted against them getting a raise during a recession LOL… I can say in my opinion they would be written in larger print and easier to read if they actually had to write it.my opinion is that any changes to save our industries should have been done thirty years ago when we first thought of sending our jobs to another country…
We didn’t and we keep voting in the same old people election after election so we actually deserve anything they do or don’t do or won’t do.. it is on us the voters..
https://www.usatoday.com/story/money/business/2014/04/12/countries-buying-american-homes/7586991/
I do understand though for manufacturing .. you buy the story find out you can make quick money and think you can control it.. the problem is in the the thought control.. that the term control is an illusion just like the puppet masters assuming they have total control..Now we are faced with what should be done and what will not be done because that would mean congress would have to actually do something.. and yes there wouldn’t be any russians involved with this either . my crystal ball says that they aren’t going to do anything at all except moan and groan back and forth yes no and really who cares we haven’t a say in any of it anyway.. except face the wall or go on some junket paid for by lobbyists..or a fact finding mission to some exotic resort on the citizens of the us tab..
The reset coming will be over when USA wages are equal to Chinese wages.
Prison labor will be a factor in making the USA competitive again. Presently 30 cents an hour.
There is nothing manufactured in the USA that cannot be found cheaper manufactured elsewhere. Americans have no clue the bloodbath necessary to make America competitive again. It’s a service economy (70%), Services which we not only do not have in Ecuador, but do not even miss to have a good life.
Eventually, the USA will look exactly like what our ancestors left when they expatriated to America. You name it, famine, political oppression, civil war, unemployment, etc. It a big enough country you will get to see it all in one region or another.
The tariff won’t work because Americans will fiance the 30% increase.
Our old mall was converted to a community college. Seems to be working out super.
Oil,oil,oil
The Insider tells https://youtu.be/ICrxWmAa_xM
George,
Congratulations on your short trade.
Gary, thanks! Coming from the Economic Fractalist that’s a hell of a compliment – and I think our work is pretty well lined up judging by your latest. Hope you got a piece of this move…
January 2018 was a major peak valuation area for the Global/US Asset Debt Macroeconomic System…. Dollar equivalents are now inexorably disappearing…and that provides a qualitative understanding for all subsequent events. The remaining assets denominated in those diminishing dollars equivalents… are losing value relative to the dollar equivalent(and other major currency equivalent) denominator……. the fractal (d)evolution is self reinforcing and the whole progressive devaluation concept is really that simple… Bitcoin … no exception… It is a mathematical deterministic process independent of North and South American , Euro-Russo-Asian, and elsewhere political, economic, and policy transitional journalistic events. The devolution is a mathematical globally interconnected certainty which conforms to simple fractal laws equivalent to those of Newtonian physics. (Sir Isaac, as smart as he was, unfortunately didn’t understand macroeconomic fractal collapse and lost a bit in the South Sea bubble devolution).