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….

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